Table of Contents

Research Handbook on Secured Financing in Commercial Transactions

Research Handbook on Secured Financing in Commercial Transactions

Research Handbooks in Financial Law series

Edited by Frederique Dahan

This cutting-edge Handbook presents an overview of research and thinking in the field of secured financing, examining international standards and best practices of secured transactions law reform and its economic impact. Expert contributors explore the breadth and depth of the subject matter across diverse sectors, and illustrate the choices and trade-offs that policy makers face via a number of illuminating case studies. The result is a unique and wide-ranging examination of transactions reform across the world.

Chapter 10: Keeping it real: SME financing, secured transactions and risk appetite

Tom Johnson

Subjects: development studies, development economics, economics and finance, development economics, financial economics and regulation, law - academic, finance and banking law


It is a well-known fact that bankers in developing economies are reluctant to lend to small businesses. The chapter argues that, leaving vendor/lessor credit aside, and ignoring the top end of the SME range, a bank’s willingness to grant an SME a credit facility in fact depends to a large extent on the SME owner having “thirty years of bricks and mortar and two cars in the driveway” – in other words, using immovable property as collateral for the loan. If personal guarantees and security rights over residential property are an important factor in access to credit for SMEs, it is important to provide a framework for promoting the titling and land recordation of residential property in developing countries, and an accompanying immovable property mortgage regime. Furthermore, land recordation systems also play a role at a secondary tier level – when rights over immovable property are bundled into a security issued by a rights holder and sold onto the market – and the chapter further emphasises the importance for developing agencies to invest in and facilitate land recordation reform.

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