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 11: Challenges in Implementing Secured Transactions Reform in Latin America

Nuria de la Peña

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


Nuria de la Peña* The lack of an effective framework for secured transactions in Latin America substantially limits its economic growth, as has been well emphasized in the preceding chapters. Legal restrictions on the use of collateral, moreover, reinforce the inequality in the distribution of wealth. The laws and institutions that support the use of collateral work well only for owners of real estate who have clear title to their land. Wealthy landowners have better access to credit, enabling them to add more easily to their wealth. This defective system of collateral most hurts those who are already disadvantaged – indigenous people, women and the disabled – the groups most heavily represented among the landless and holders of untitled land. A major problem is the lack of an effective framework for using movable property as collateral for loans. Only new motor vehicles and titled urban real estate are readily accepted as collateral. Yet new motor vehicles represent less than 0.5 percent of the capital stock. Micro, small and mediumsize enterprises typically have 95 percent of their assets in movable property * The arguments set out in this chapter were first presented at the International Conference on Collateral Reform and Access to Credit, London, August 2006, sponsored by the EBRD and the World Bank. The views expressed in this chapter are solely the author’s and do not represent the views or opinions of CEAL or the governments, institutions or countries it represents. The author thanks her associates Fernando Cantuarias, Heywood Fleisig,...

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