Secured Transactions Reform and Access to Credit

Secured Transactions Reform and Access to Credit

Elgar Financial Law series

Edited by Frederique Dahan and John Simpson

The chapters presented here provide, for the first time, a comprehensive and cutting-edge view of the subject – from both a legal and economic perspective. They start at the macro level of financial systems, moving towards the behaviours of lenders (commercial banks and micro-lenders), policy options for government and the mechanisms of collateral law reform.

Chapter 7: Use of Security in Challenging Environments: The Microfinance Perspective

Martin Holtmann

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


7. Use of security in challenging environments: the microfinance perspective Martin Holtmann* 7.1 INTRODUCTION Microfinance has come of age. The top league of the microfinance industry currently consists of approximately 940 organizations with combined assets of US$26 billion.1 Around the world, microfinance institutions (MFIs)2 are serving tens of millions of customers. Most of them provide access to credit, but many MFIs also offer deposits and a range of other financial services such as insurance, housing finance, leasing, etc. In fact, it is fair to argue that microfinance is increasingly becoming integrated in the mainstream financial system.3 MFIs operate in difficult environments such as developing and transition economies, post-conflict countries, and remote rural areas. MFIs were the first providers of finance in post-conflict Kosovo and the Democratic Republic of Congo. A microfinance NGO, BRAC, is the leading mass lender in Afghanistan.4 In such kinds of environments, collateral and secured lending present huge challenges. The main goal of this short chapter is to investigate whether the microcredit experience holds any lessons for the future development of the secured lending and collateral reform agendas. * The author would like to thank Christoph Freytag (IPC Frankfurt), Julia Abakaeva (CGAP, Washington, DC), Alexander Yeriomin (Trast Bank, Kiev) and Richard Nalela (ES Global, Kampala) for their valuable contributions and many helpful discussions. 1 The Microfinance Information Exchange (MIX) is the most comprehensive and up-to-date source of data and information on microfinance organizations. See...

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