Your cow or TV set can now get you a bank loan

You will now be able to secure a loan from your bank using livestock, crops and household appliances as collateral.

This is after President Uhuru Kenyatta Wednesday signed into law the Movable Property Security Rights Bill 2017, which enhances the ability of low-income earners to access credit using such movable assets.

The legislation is expected to deepen financial inclusion, especially among those in the informal sector who have had difficulty accessing cheaper loans from commercial banks which normally insist on immovable assets such as land and buildings as security.

This has seen such individuals go for more expensive credit from unregulated microfinance institutions and shylocks. The act defines tangible assets as all type of goods, including motor vehicles, crops, machinery, livestock and other movable assets such as television sets, refrigerators, computers and crops.

Besides tangible assets, borrowers will also be allowed to use intangible assets such as intellectual property. While unveiling the Movable Property Security Rights Bill (2016) last year, National Treasury Cabinet Secretary Henry Rotich said the then proposed law would go a long way in making credit affordable for millions of Kenyans who had been locked out for lack of fixed assets such as land and buildings.

Security agreement

“Mr Speaker, the Government continues to implement measures to address the high cost of credit and to expand access to credit in the economy. We have developed the Movable Property Security Rights Bill, 2016 which provides for borrowing using movable assets as collateral, for enforcement of security rights by lenders and protection of borrowers using such collateral,” said the CS in his budget statement.

“In addition, we are developing the electronic collateral registry where lenders will be able to lodge their security rights on specific collateral through an online platform,” he added. 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 defaults.

The lender and borrower shall enter into a security agreement, which will result in the creation of a security right.

According to the new law, 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 (mortgage on a movable item of property), 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 an asset.

[email protected]