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Volume 36, Issue 4, December 1997 >
Please use this identifier to cite or link to this item:
http://purl.umn.edu/54724
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| Title: | Efficacy of collateral types used by financial intermediaries in KwaZulu-Natal |
| Authors: | Kuhn, M.E.
Darroch, Mark A.G.
Ortmann, Gerald F. |
| Issue Date: | 1997-12 |
| Abstract: | Collateral is an important incentive device used by lenders to encourage loan repayment.
However, collateral must have secure and transferable title, it must be marketable, have low
lender liquidation costs and lenders must be able to attach the collateral. Study results for
rural and micro-enterprise finance institutions in KwaZulu-Natal showed that assets such as
vehicles and equipment were not effective as collateral due to high costs in attaching the
asset. Cessions on crops were often constrained by flaws in collection mechanisms. Secure
and transferable property rights were important preconditions for land to have value as
collateral. Collateral substitutes such as joint liability mechanisms were less effective when
lending to large farmer groups (30-60 members) compared with small groups (4-6
individuals) of micro-entrepreneurs operating in urban areas. |
| URI: | http://purl.umn.edu/54724 |
| Institution/Association: | Agrekon>Volume 36, Issue 4, December 1997 |
| Total Pages: | 13 |
| From Page: | 637 |
| To Page: | 649 |
| Collections: | Volume 36, Issue 4, December 1997
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