Borrowers in Kenya will now be able to access loans from multiple lenders. This follows the coming into force of a law that will require all lenders to post collateral set for loans in a single platform.
The Movable Property Security Rights Act, which was assented into law by President Uhuru Kenyatta last year, makes it possible for borrowers to use movable collateral such as furniture, office equipment or household equipment to take loans.
“It means that borrowers will be able to use the same assets to secure borrowing from other lenders. In the event that such a borrower defaults with both lenders, the first lender who did not register their security under the new Act will be unable to claim priority of security against the second lender,” said Esther Omulele, an advocate with MMC Africa Law.
The Act created a single electronic registry for motor vehicle logbooks and other movable assets used as security for bank loans – aiming to make it easier for borrowers to maximise the use of such collateral.
The Act also provides that in case of default, the registry will also be used to show the lender with the first claim on the asset being disposed.
“It has addressed lack of bankable collateral which made financial institutions unwilling to extend them credit,” said Kenya Bankers Association (KBA) chief executive Habil Olaka.