A chattel means any item of property other than real estate – something that a person owns other than land or buildings and can be staked as collateral in any financial institution to get credit for business purposes.
A well-functioning chattel securities registry in Uganda is, therefore, crucial at this time when access to finances in the country for small businesses is difficult, yet such businesses are equally important for the growth of our economy hence the need to support them.
Today, small enterprise owners cannot easily access finances to expand their businesses partly because they lack collateral, funds for feasibility studies and the various bank charges that come along. This means they cannot access finances to enable them to grow.
One of the mandates of Uganda Registration Services Bureau (URSB) stipulated under the Chattels Securities Act 7 of 2014, is starting up and operationalising the Chattels Securities Registry to enable growth of the private sector, especially the small and medium sized enterprises (SMEs), and upcoming businesses, especially those owned by youth and women.
Deliberate efforts are, therefore, underway to establish an electronic chattels securities registry for Uganda to ease borrowers’ access to affordable credit from the formal and regulated financial sector as opposed to the informal sector.
Once operationalised, the Chattels Securities Registry will be a public database containing information on all security interests in any movable property (chattels) such as livestock, vehicles, machinery, jewellery, home furniture, wood and stock among others.
The register will also contain details of the creditor and borrower, particulars of the moveable asset pledged as collateral and the date of registering the security interest.
Services of this chattels registry will be open to all and accessed electronically by individuals, organisations, banks, microfinance institutions, Saccos, licensed money lenders and legal representatives who may act on behalf of lending institutions.
The general public will only be restricted to searches on the Chattels Securities Register to ascertain encumbrances because prior to accepting a moveable asset as collateral for a loan, a creditor needs to inspect the register and obtain proof of its ownership and encumbrances, if any.
Today, businesses can only thrive if parties therein find confidence in a stable, predictable and prudent environment that can bring about healthy competition and hence improved profits, which will translate into national economic growth.
The NRM manifesto 2016 that is anchored on taking Uganda to modernity through jobs and wealth creation by 2020 provides the foundation for strengthening moveable collateral registration in Uganda.
The manifesto recognises that whereas Ugandans are good at establishing business enterprises, these enterprises usually collapse in less than three years because of limited access to credit.
Currently, in the absence of a well-organised and well-managed database for all security interests in chattels, financial institutions are reluctant to extend loans to potential borrowers and opt for immovable collateral security such as land and buildings, which many Ugandan business people – especially women and the youths – don’t own.
For entrepreneurship to thrive in Uganda, therefore, high lending rates need to be addressed and some of these will be dealt with directly once the electronic chattels securities registry is operationalised at URSB.
Our planned approach is to induce financial providers to diversify their credit portfolio to include moveable assets so that individuals can pledge their boda bodas, taxis, motor vehicles, inventory or trading stock. Rural and urban poor such as women and youth can also pledge their personal effects such as electronics and jewellery to obtain start-up credit at affordable interest rates.
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