Kenyans will start borrowing from commercial banks using such movable assets as machinery, livestock and crops once the collateral bill that the parliament has passed becomes a law.
The Movable Property Security Rights Bill (2016) is meant to help borrowers get financing from lenders using such movable assets as crops, livestock, machinery and inventories as collateral.
This will go a long way in making credit affordable for millions of Kenyans who have not been able to access credit for lack of fixed assets such as land and buildings which have, in most cases, been used as collateral.
The Government will create an electronic collateral registry where borrowers will register trusts and collateral to secure credit facilities provided by lenders. In addition, the government is developing the electronic collateral registry where lenders will be able to lodge their security rights on specific collateral through an online platform.
Known as the collateral registry, the online platform will be a public database that will allow financial institutions to register security interests in movable property, and mitigate the risk of customers. The lender and borrower shall enter into a security agreement which shall result in the creation of a security right.
According to the passed bill, a security right is a property right in a movable asset that is created by an agreement to secure payment from a creditor such as a commercial bank. Borrowers can also create a security right on a chattel mortgage, credit purchase transaction, credit sale agreement, floating and fixed charge, pledge, trust indenture, trust receipt, financial lease and any other transaction that secures payment or performance of an obligation and an outright transfer of a receivable.
Besides enhancing the ability of individuals and entities to access credit using movable assets, the passed bill will also promote consistency and certainty in secured financing relating to movable assets.