The Bankers Association of Zambia (BAZ) says commercial Zambian banks have started piloting the use of livestock as collateral. Many Zambians welcomed the move, saying it is hard to meet collateral demands set by banks.
According to BAZ, the pilot programme is conducted in collaboration with the Dairy Association of Zambia (DAZ).
Some banks in South Africa and Namibia already accept livestock as temporary security. In April, Zimbabwe announced its banks will do the same to lend money to smallholder producers.
Government recently enacted the Movable Property (Security Interest) Act which makes assets like livestock, farm equipment and motor vehicles eligible as collateral. Prior to this, financial institutions only accepted fixed property as collateral.
“Banks have already starting piloting the use of livestock animals such as cows and goats as collateral when lending money to micro, small and medium enterprises,” said Mirriam Zimba, BAZ public relations officer.
Zimba said the banks are working with the World Bank, Bank of Zambia and other stakeholders on structuring products suitable for movable asset security.
She said the industry is also conducting training workshops to up-scale lending to smallholder livestock producers.
Industry experts said issues with identification tags, branding, livestock insurance and cattle disease monitoring must be dealt with to ensure the successful introduction of livestock security.
“We need to tread carefully to unlock the value of livestock to help increase liquidity among farmers,” said an economist who spoke on condition of anonymity.
Adam Nakalowa, a goat farmer from Chilanga, said using livestock as security will enable smallholder producers who do not have conventional collateral, to borrow money from the banks.