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Standing inside his wholesale shop in Blantyre, Malawi, Asuman Mbalaga is busy checking his stock. His wife, Jocelyne, greets customers as she moves between towering stacks of water bottles and laundry detergent.

Mbalaga, who is originally from Burundi, set up Alipo Wholesale eight years ago in a container space nearby, using money borrowed from a friend. “I saw that it was profitable, so I thought to set up a shop in town,” he says. He and his wife decided to move the business to Blantyre’s busy Limbe neighborhood.

Mbalaga’s business is one of over 1 million small- and medium-sized businesses that provide jobs in Malawi. As with most of the entrepreneurs behind these ventures, he doesn’t have land or real estate to use as collateral for a bank loan. That requirement has kept many of them from realizing their potential. But Mbalaga was able to secure an overdraft facility by using his company’s truck as collateral, thanks to an initiative by FMB Bank. An overdraft facility allows clients to withdraw cash from their account up to a limit approved by the bank.

Most of small- and medium-business owners in Malawi have no land or real estate to use as collateral for a bank.

The use of moveable assets as collateral is new in Malawi: in 2015, with support from IFC, the country’s government launched the collateral registry, an online system to register moveable collateral used for loans. The collateral registry makes it possible for banks to lend to a whole new customer base, including clients like Mbalaga, who were previously excluded from formal credit.

In the three years since the registry launched, nearly 16,000 micro-, small-, and medium-sized businesses in Malawi have been able to access financing with their moveable assets. “The loan helped me a lot,” he says. “I was able to add to my stock. Working with my wife, I am able to pay my staff well.”

Clara Chirwa, head of credit at FMB Bank in Blantyre, with client Kiran Purshotam, owner of KP Transport. Purshotam used his car as collateral to obtain financing for his business.

Making Access to Finance Possible

Moveable assets eligible for collateral registries can include livestock or crops, farm equipment or vehicles, inventory, and accounts receivables. Besides increasing the financing options for individuals and small-scale businesses, the registries enhance transparency in the credit system and strengthen the financial infrastructure. In case of default, lenders have a priority interest and are able to easily take possession of the asset.

IFC supported the government of Malawi in building an appropriate legal, regulatory, and institutional framework for movable assets-based lending. From the start, the project has focused on two major outcomes: enacting a legal framework for secured transactions and developing a web-based centralized registry for security interests in movable property.

Since the registry launched in 2015, more than 15,000 micro, small, and medium firms in Malawi have been able to access financing with moveable assets.

Malawi is the third country in sub-Saharan Africa to establish a modern, online collateral registry with support from IFC, following Ghana and Liberia. Collateral registries also exist in Sierra Leone, Nigeria, and Zambia. IFC is exploring the development of others in Cote d’Ivoire, Ethiopia, Madagascar, and Mozambique. The registries are supported by the United Kingdom’s Department for International Development (DFID) and the Conflict Affected States in Africa Initiative (CASA), which is funded by Ireland, the Netherlands, and Norway. 

For Mbalaga, working via the collateral registry with FMB Bank inspired him to think about business strategies that would help assure a more secure future. “I would like to get a bigger loan, so that I can further grow my business by diversifying into agricultural commodity trading,” he says.

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Published in January 2019