Home » Business » Collateral Systems for Farmers Vital, Says Guzah

Financial institutions should move away from traditional collateral systems that demand title deeds and formulate alternative arrangements for farmers and SMEs.

Farmers have been hindered by lack of funding as banks refuse to take Government’s 99-year leases as collateral, while SMEs have also suffered as most do not have security.

After a closed door meeting with Reserve Bank of Zimbabwe Governor Dr John Mangudya yesterday, National Business Council of Zimbabwe president Dr Keith Guzah said traditional methods of collateral were no longer applicable and Government should urgently address this.

“Under the current conditions, the 99-year lease is not considered appropriate collateral for banking finance, while the farmers are in urgent need of finance to operate sustainably in the aftermath of an empowerment process.”

Farmers and SMEs, Dr Guzah added, had capacity to fulfil Zim-Asset.

“The important consideration is to adjust the terms of lending in a manner that makes business sense and removes risk burden on the bank. Through innovative means, it is possible to formulate alternative collateral arrangements and resolve the current stalemate.”

He said farmers could present their production plans to banks to invest in output with a view to recovering their money from sales.

SMEs, which employ the majority of workers, have suffered from lack of capital and consistent funding from financial institutions, which often demand property as collateral.

Source : The Herald