Introduction: Why collateral matters

When you walk into a bank or a lending institution to request a loan, one of the first questions you’ll hear is: “What collateral do you have?”

Collateral simply means an asset or something valuable that you pledge to the lender as security. If you fail to repay the loan, the lender has the right to claim or sell that asset to recover the money. In Zambia, collateral is a key part of how most loans are approved. For individuals, entrepreneurs, and SMEs, understanding what counts as collateral, and how to use it smartly, can make the difference between getting the funds you need or walking away empty-handed.

At Divitia Investments, our mission is to make loans more accessible, transparent, and flexible. That means helping you understand not just the traditional types of collateral, but also newer and innovative ways you can use your assets to unlock financing. This article is your comprehensive guide to collateral in Zambia — simplified, practical, and tailored to the realities of everyday borrowers and business owners.

What is loan collateral?

Collateral is anything valuable you give to a lender as a promise that you’ll repay your loan.

• If you repay on time, you keep your asset.

• If you fail to repay, the lender may sell or use that asset to recover the loan.

Think of collateral as a safety net for the lender. Because they take less risk, they are often willing to:

• Approve your loan faster

• Give you larger amounts

• Charge lower interest rates

In Zambia, many lenders will not approve loans without collateral. But the good news is that collateral is not limited to houses or cars — there are now many options available.

Common types of loan collateral in Zambia

These are the most well-known and widely accepted forms of collateral:

1. Landed Property (homes, land, and buildings)

• This is the most traditional and trusted type of collateral.

• Banks prefer titled properties because they hold stable value.

• Example: If you own a house in Lusaka worth K800,000, a bank may be willing to lend you 50–70% of that value.

👉 But here’s the challenge: Not everyone has titled property, and registration can be expensive and time-consuming.

2. Vehicles (cars, motorbikes, trucks)

• Vehicles are common collateral, especially for personal or SME loans.

• The lender checks the car’s value and condition before approving the loan.

• Example: If your Toyota Hilux is valued at K250,000, a lender might give you up to K125,000.

👉 Tip: The vehicle usually stays with you, but in some cases, lenders may keep the registration papers until you finish repayment.

3. Cash or fixed deposits

• Some borrowers use savings, Treasury Bills, or fixed deposits as collateral.

• This is the lowest-risk option for lenders, so loans are often approved quickly.

• Example: You have K50,000 fixed deposit. A lender may give you a loan worth 80–90% of it.

4. Business assets (equipment and inventory)

• SMEs often use business machinery, tools, or stock as collateral.

• Example: A printing business might pledge its industrial printer; a retail shop might pledge its inventory.

👉 Challenge: Many lenders undervalue stock or equipment, so SMEs often struggle to get the full loan amount they need.

Innovative and movable collateral options in Zambia

Not everyone owns land, vehicles, or big savings. That’s where movable collateral comes in and it’s changing the game for SMEs and individuals.

The Collateral Registry (PACRA)

The Movable Property Registry System (MPRS), managed by PACRA, allows borrowers to register movable assets as collateral. This system is still new to many, but it’s a game changer for:

• SMEs without property

• Women entrepreneurs who may not have land titles

• Young entrepreneurs just starting out

What counts as movable collateral?

• Household electronics (TVs, fridges, laptops)

• Furniture

• Agricultural equipment (tractors, irrigation systems)

• Livestock (cattle, goats, chickens)

• Stock or inventory in your shop

👉 Example: A farmer with 20 cows can register them as collateral and access credit, even without owning land.

This opens up financial inclusion for groups that have been excluded from traditional lending.

Lesser-known or emerging collateral options

Some financial institutions in Zambia are also adopting more flexible forms of collateral. These include:

• Corporate guarantees – Another company guarantees your loan.

• Irrevocable domiciliation – Your salary or business income is sent directly to the lender to ensure repayment.

• Salary advance agreements – For employees, your future salary can serve as collateral.

👉 These options don’t require physical property, making them more accessible for urban workers and SMEs.

How much can you borrow against collateral?

This is where terms like “Loan-to-Value Ratio (LTV)” come in but let’s simplify:

• Lenders usually don’t give you 100% of the value of your collateral.

• They lend 50% to 80% depending on the type of asset and risk.

Example:

• House valued at K1,000,000 → Loan might be K500,000 to K700,000

• Vehicle valued at K200,000 → Loan might be K100,000 to K140,000

• Inventory worth K50,000 → Loan might be K20,000 to K30,000

👉 This protects the lender in case the asset loses value or takes time to sell.

How Divitia makes collateral work for you

At Divitia, we understand that every borrower is different. That’s why we:

• Accept both traditional and movable collateral

• Provide quick approvals to save you time

• Use transparent terms so you always know what you’re signing up for

• Support SMEs and women entrepreneurs who often lack traditional collateral

• Work with clients to find creative collateral strategies

Whether you’re an employee applying for an MOU loan, a woman entrepreneur under the Anakazi loan program, or an SME needing stock financing, Divitia helps you unlock credit that matches your reality.

Practical advice for borrowers considering collateral

If you’re thinking of using collateral for a loan, here are some tips:

1. Know the value of your asset. Get an independent valuation so you’re not underpaid.

2. Choose the right collateral. Match the loan size with the value of your asset. Don’t pledge a K500,000 house for a K20,000 loan.

3. Understand the registration process. If you’re using movable assets, register them with PACRA for transparency.

4. Plan your repayments. Remember, if you default, you risk losing your asset.

5. Talk to your lender. At Divitia, our team can guide you on the best collateral option for your needs.

Conclusion: collateral as a door, not a barrier

Collateral should not be seen as a barrier to borrowing but as a doorway to opportunity. From traditional land and vehicles to innovative movable assets like livestock or equipment, Zambians today have more choices than ever before.

The key is understanding what you have, how to use it wisely, and working with the right partner.

At Divitia Investments Limited, we’re committed to helping you use your assets — whether big or small — to access the capital you need to grow, invest, or secure your future.

👉 Ready to explore your collateral options? Talk to Divitia today and take the first confident step toward your financial goals.