Reforming Collateral Laws to Expand Access to Finance
Most readers, especially those with car loans or home mortgages, know about collateral--property that the lender can take away from the borrower in the event that the borrower defaults. In low/middle income countries, it is understood that conserva...
| Main Authors: | , , |
|---|---|
| Format: | Publication |
| Language: | English en_US |
| Published: |
Washington, DC: World Bank
2012
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2006/06/7021891/reforming-collateral-laws-expand-access-finance http://hdl.handle.net/10986/7100 |
| Summary: | Most readers, especially those with car
loans or home mortgages, know about collateral--property
that the lender can take away from the borrower in the event
that the borrower defaults. In low/middle income countries,
it is understood that conservative lenders exclude firms
from credit markets with their excessive collateral
requirements. Usually, this is because only some property is
acceptable as collateral: large holdings of urban real
estate and, sometimes, new motor vehicles. Microenterprises,
SMEs, and the poor have little of this property but they do
have an array of productive assets that could easily be
harnessed to serve as collateral. It is only the legal
framework which prevents firms from using these assets to
secure loans. In countries with reformed laws governing
collateral, property such as equipment, inventory, accounts
receivable, livestock are considered excellent collateral.
This book aims to better equip project managers to implement
reforms to the legal and institutional framework for
collateral (secured transactions). It discusses the
importance of movable property as a source of collateral for
firms, the relationship between the legal framework
governing movable assets and the financial sector
consequences for firms (better loan terms, increased access,
more competitive financial sector), and how reforms can be
put in place to change the lending environment. |
|---|