Over 60,000 movable properties registered
The National Bank of Ethiopia (NBE) is preparing to launch the movable property collateral loan scheme in Jigjiga, the capital of the Somali regional state, after the new scheme was delayed by a year. The scheme will be launched with credit to be supplied against livestock collateral.
The scheme will expand the loans given by holding other movable assets as collateral as the service expands in other regions following the national launch.
The Oromia, Southern Nations, Nationalities, and People’s Region (SNNPR), and Amhara regions will follow suit as the national financial inclusion council sets a plan for launching and expanding the scheme in this fiscal year.
The council, under the auspices of the Office of the Prime Minister, is chaired by Finance Minister, Ahmed Shide, and NBE’s governor, Yinager Dessie (PhD).
“We have classified the scheme into four clusters. The three clusters will follow after Jigjiga. We will fix the launching day once officials of NBE return from a meeting abroad this week,” said Solomon Desta, vice governor of NBE and member of the national financial inclusion council.
The Ethiopia Movable Collateral Registry Office, established under the NBE, has been developing and testing the Electronic Collateral Registry System, which will secure the creditor’s rights to movable properties.
During its testing phase, the system registered over 60,000 movable properties on its database across the country. In a bid to avoid multiple collateralizations, a movable property must be registered before it is collateralized.
The system allows creditors and other information seekers to obtain information from the system’s website and get a certificate on the property’s status. The data center is operated by the office and accessed by financial institutions.
Receiving credit from the collateral of movable property is part of the government’s effort to address the financially excluded parts of society with its financial inclusion plans.
The scheme is devised to create access to finance for low income segments that has no collateral to access finance from banks. Two years ago, the NBE directed banks to devote at least five percent of their total annual loan portfolio to the scheme. This means close to 10 billion birr will be available for the scheme annually from all the banks.
Farmers can get credit by using their livestock, farm products, or land use rights as collateral.
“The Somali region was chosen for the launch because pastoralists are largely financially excluded. Other farmers receive government assistance with fertilizer and seed, but pastoralists do not,” an NBE official told The Reporter.
After registering in the movable collateral registry, pastoralists in the region will be able to obtain loans from banks and microfinance institutions using their cattle, camels, goats, donkeys, or other livestock. A number given to the particular livestock will be tagged on the livestock’s ear by the Ministry of Agriculture.
The ministry is also mandated to carry out a monthly livestock price information list on its website to allow creditors to evaluate the value of the livestock used to provide loans. However, the secured creditor can also use other market information released by other reliable sources to determine the value of the livestock.
Farmers are also obligated to take reasonable care of the livestock or other movable property pledged as collateral.
However, livestock in the Somali region are in poor condition at the moment. The worst drought in 40 years due to four consecutive failed rainy seasons has hit pastoralists and their livestock hard. 3.8 million people are in need of food assistance, and over one million live cattle have already perished due to the drought, according to data from the region’s Disaster Risk Management Bureau.
The official at the NBE stated that there is no relation as to why the Somali region was selected for the launch.