ADB says 'moveable assets' key to prosperity

Transcript

The Asian Development Bank says unlocking the value of what's called 'moveable' property or assets is the key to boosting prosperity in the Pacific.

Moveable assets are classified as anything owned by an individual or a business, excluding land or buildings, and include vehicles, machinery, crops or even future crops.

ADB economist, Paul Holden, says obtaining credit is difficult in many of the Pacific's developing countries.

Dr Holden told Amelia Langford that the solution lies in borrowers being able to use their movable assets as collateral for loans.

PAUL HOLDEN: Pacific Island countries as a region are among the most advanced of developing countries in adopting this framework and in addition much of that adoption is based on the New Zealand model, the change in NZ happened in 2002 I think, that really transformed a lot of lending and revolutionised New Zealand financial markets and as part of the reform programme that I am attached to - we have been implementing similar reforms in other countries in the Pacific and we are at a stage where virtually all of the countries have already done it or are going to do it.

AMELIA LANGFORD:I see it can be a help for women in particular?

PH: Oh, absolutely. In particular it can be a help to women because traditionally lenders have asked for land as collateral. Now, the nature of landholding in the Pacific is such that very few women have any rights over land at all and therefore they were essentially shut out of financing but using this framework they can now take the assets of their businesses and use this as collateral and we have some very inspiring stories.

AL: Are there risks though, in terms of say a person's business fails and they have put a lot of stock in their moveable property to get the loan in the first place or the credit - what happens then?

PH: No, well, I mean the thing is that it doesn't really affect the way businesses are run. What it does allow members to do in the event of failure, business failure, is to take those assets and sell them, which reduces lending risk. Now, of course, to some degree it means that the borrower is subject to the seizure of some of their assets but the point is that without being able to pledge those assets as security they wouldn't have been in business at all. And in fact what we found is that the non-performing loan ratio, you know, the amount of defaults that lenders have received, is really very low. The best example that I have of this comes from the Solomon Islands, where one of the credit corporations has managed to expand its lending seven times using this framework and their default rate is between one and two percent. It's really low.