The recent move by the government to implement the Secured Transaction Act from mid-March has eased the access of acquiring loans for people who do not have fixed asset. As per the Act prospective borrowers can now secure loans against collateral of movable assets like gold, silver and even cattle. Small farmers and business owners in the past have deterred from taking loans from commercial banks as the paperwork and formality were very rigid and involved asset valuation among other things which was a costly process both for banks and borrowers.
Small loans transaction was mostly conducted through informal means, cooperatives and micro finance which meant paying high interest rates. With this Act, farmers and small business owners can now access loan as per the banks interest rate minus the hassle of paperwork and shorter loan delivery time. Furthermore, the Act also regulates multiple borrowing because the collateral has to be registered with a registry office that would update banks and financial institutions about the borrowers’ loan other Bank and Financial Institutions ( BFIs) as well (Kathmandu Post, 2014, February 8).
The Secured Transaction Act is one of the many policies needed to ease the access to finance in terms of loans in Nepal. But the Act alone won’t be enough. Easing the process of opening up bank accounts and also easing other monetary transactions are as much a need. One way of doing this could be through mobile banking initiatives and improving the micro-credit sector in Nepal.