Malawi Parly adopts Personal Property Security Bill to help SMEs
Malawi Parliament Thursday adopted the Personal Property Security Bill which is aimed addressing challenges Small Medium Enterprises (SMEs) in accessing finances for the businesses.
Speaking to the media after the bill was passed; Minister of Trade and Industry Sosten Gwengwe said the bill will make it possible to use movable items like bicycles and cars as collateral to access loans at lending institutions.
“When you go to banks for loans, they have been requiring land, buildings or other immovable assets, that has proved very difficult for SMEs and individuals to access loans.
“However, in our villages people have been giving out their movable items like vehicles and bicycles without there being a law covering them properly. People have been doing ‘katapila‘ and ‘pinyolo’ without a proper law to protect them as debtors and the creditors,” he said.
Gwengwe added that lack of such laws has created conflicts hence government decided to introduce the law to put order and sense in such scenarios.
The Trade and Industry minister also pointed out that the bill will introduce electronic registry for movable assets to reduce lending risks.
“Lending institutions will be able to search the movable items that have already been used as collateral to a loan somewhere else. This piece of registration will enable SMEs to access credit more than before,” he said.
On concerns raised by some members that the bill may victimize debtors by leaping them off if they fail to pay back the credit, Gwengwe said such concerns arose because some members have not understood the bill.
“This law is protecting debtors, if for instance you borrow K5 million and the asset they want to take away from you is more than that, the law says if you sale that asset, the creditor is under obligation to fetch reasonable price for that security.
“Any access from the proceeds if you do not have any others loans should go back to the debtor. There was leap off before but this kind of provision will ensure that the debtors are protected. What we want to achieve is that those village tycoons who have been seizing others property without due consideration are checked,” he said.
Previously, SMEs and individuals have had problems accessing loans from money lending institutions as movable items were not allowed as collateral.
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