Does the introduction of movable collateral registries increase firms’ access to finance? by Maria Soledad Martinez Peria

To reduce asymmetric information problems associated with extending credit and increase the chances of loan repayment, banks typically require collateral from their borrowers. Movable assets often account for most of the capital stock of private firms and comprise an especially large share for micro, small, and medium-size enterprises. Hence, movable assets are the main type of collateral that firms, especially those in developing countries, can pledge to obtain bank financing. While a sound legal and regulatory framework is essential to allow movable assets to be used as collateral, without a well-functioning registry for movable assets, even the best secured transactions laws could be ineffective or even useless.