New Property Bill Now Law, is This Good News for Low Income Earners?

By Amina Faki

Low-income earners can now have access to bank loans by using livestock, crops and other household appliances as collateral.

The head of State President Uhuru Kenyatta on Wednesday signed the Movable Property Security Rights Bill 2017.

A number of government officials including Deputy President William Ruto, National Assembly Speaker Justin Muturi, solicitor general Njee Muturi and National Assembly Majority Leader Aden Duale witnessed the signing.

The Bill was developed last year by the Kenya Law Reform Commission in collaboration with the office of the Attorney General & Department of Justice through the registrar general’s Office and the National Treasury with the support of the FSD-Kenya and the World Bank.

The Movable Property Security Rights Bill developed in 2016 did seek to provide;

1. for the use of the movable property as collateral for credit facilities,
2. to establish the office of the Registrar of security rights,
3. to promote consistency and certainty in secured financing relating to movable assets,
4. to enhance the ability of individuals and entities to access credit using movable assets
5. to establish a Registry to facilitate the registration of notices relating to security rights in movable assets

According to the president, the law will enhance the ability to access credit using movable assets. He added that the new law facilitates the use of the movable property as collateral for credit facilities, establishes the office of the Registrar of security rights as well as provides for the registration of security rights in the movable property.

The move is expected to increase access to credit by widening the pool of collateral assets to include property such as livestock, crops and household goods. This means that the bank customers without common costly forms of collateral such as motor vehicles logbook or land title deeds will be able to access credit from banks through this law.

The law will also allow especially women, young people, small-scale farmers and the small scale entrepreneurs to secure bank loans as a way of boosting the economy.

According to Halil Olaka, the head of the Kenya Bankers Association, the new law is a good development for the banking industry.

Lack of central database that registers the movable assets over the years had denied the banks from exploiting the new bill but with the introduction of the Register, it ensures that financial institutions can log in and make a claim. The register also keeps track on the transfer of property from one person to the other with the bank’s knowledge.

Even with the new bill giving the low-income earners the chance to better their lives by accessing bank credits, the government should limit the access to credit because expanding access to financial services especially credit at a too fast a pace and with too little control could expose the Kenyan economy to stability risks. This could happen if too many households have access to credit.