Bringing More Dead Capital to Life

This note builds a case for expanding the types of property that can be used as collateral to include movable property. It states that movable property registries offer the possibility of finance to a much wider section of the population.Collateral lending reduces costs of risks and lending. Worldwide, the best-known and most utilized form of collateral is real property or land and buildings. Poor people in developing countries are unable to access loans because they do not own land. The note states that:

• A country can substantially expand the potential for secured lending by broadening the range of assets that can be used as collateral;
• Credit systems need laws to recognize intangible property as collateral.
• Modern collateral lending systems combine a business-oriented legal framework with a public registry to give borrowers and lenders maximum flexibility in structuring lowers costs and lower risk;
• Collateral movable property registries are useful in reaching out to rural people who are otherwise excluded.

The note lists ways in which collateral lending lowers risks and costs. It illustrates collateral lending with an example and explains how to establish a movable property registry system.