Member Article

On February 11, 2015, Supreme Decree No. 2264 was enacted to establish the Productive Development Bank, as the entity in charge of recording unconventional collateral offered by productive entities. This will allow rural and non-rural producers to gain access to productive credit that had previously been inaccessible because of a lack of conventional collateral. Newly enacted regulation, set forth by Supreme Decree No. 2264 (“S.D.”), rules, in part, the offering and registration procedure for unconventional collateral, that is used to obtain credit, and mainly aimed at small producers.

The S.D. regulates articles No. 99 and 100 of the Financial Services Law No.393, of August 21, 2013, specifically, the section relating to Financing of Productive Development, thus, setting forth the terms and conditions for the different types of accepted unconventional collateral, to be used for rural and non-rural activities: 

• Subject to condition, whereby, it must relate to one of the unconventional assurance options available and be inherent to the activities;
• Unconventional collateral accepted can be: 
• Collateral funds;
• Farming insurance;Custody of documents pertaining to real estate and rural properties; 
• Machinery that is subject or not to registration and is possessory or non-possessory;
• Contracts or documents related to preliminary future sales for the local market or for export;
• Collateral or certificates offered by community organisms or territorial organizations;
• Products stored in owned or leased storage facility;
• Semi-moveable collateral;
• Registered intellectual property;
• Among other unconventional choices of collateral. 

Some of the unconventional collateral options accepted are: work tools, production machinery, farming infrastructure used for poultry and pig farming, livestock, future harvests backed by future sales agreements.

Unconventional Collateral Registry

According to Law No. 393, the State shall create a special registry in charge of recording unconventional collateral that is used for financing productive activities, using public, private or mixed mechanisms. The SD rules this section of Law 393, and grants authorization to the Productive Development Bank Mixed Corporation (“PDB”) (in Spanish: Banco de Desarrollo Productivo Sociedad Anónima Mixta), to implement and manage the Unconventional Collateral Registry System and provide its services to the financial system, rendering the registration and assessment of unconventional collateral. 

The system shall be created in conformity with pending regulation, to be issued by the Financial System Supervision Authority (in Spanish: Autoridad del Sistema Financiero), and rules the functionability of the Unconventional Collateral Registry System implemented and managed by the PDB.

The S.D. states that the PDB must undertake the registration and maintain a database of all nonconventional collateral recordings that have been approved by Law No. 393. Its role is similar to the Real Estate Office's role, in that it records real estate property, and for example is able to verify such things as machinery that is encumbered by a financial institution, that has not been previously offered as collateral in favor of a different financial entity. Thus, preventing a producer from securing a loan and attempting to use the same collateral with different banks. 

Links: 

Financial Services Law No. 393: https://www.bcb.gob.bo/webdocs/sipav/Leyes/Ley393.pdf

Supreme Decree No. 2264: http://www.gacetaoficialdebolivia.gob.bo/edicions/ver/726NEC