How Can the Youth Use IP Rights as Collateral For Loans?

Over the past few years, the creative economy has thrived, mainly exacerbated by technological innovations and the youth’s constant desire to be atop the digital trends. Electronic platforms, file sharing, and music streaming, among others, have led to new business models – and to protect their innovations, people have acquired Intellectual Property (IP rights) to these innovations.

IP rights are a form of property granted through trademarks, patents, industrial designs, copyrights, and geographical indications, among others, that enable the owner to exercise a monopoly on their assets.

The popularity of IP rights has pushed the financial sector, especially the asset-based lenders, to turn to IP portfolios as another form of collateral to secure their loans.

In 2017, the Movable Property Security Rights Act (“MPSRA”) was enacted in Kenya as a policy guiding how movable property such as intellectual property rights can be used as collateral for credit.

This marked the first time in Kenya for intangible assets to be recognized as valid collateral for accessing credit from financial institutions.

But despite the enactment, the uptake has been low. The challenge of IP rights as collateral for credit is faced with serious concerns associated with the actualization of the concept. Valuation of IP rights, for instance, is one of the biggest challenges.

Lenders must first ascertain whether the asset is commercially viable or not – this is mainly since a bank’s ability to find a ready market to sell the IP rights in the event of a default is another challenge altogether.

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But despite this and other challenges, the potential advantage of integrating intellectual property rights within the financial system cannot be emphasized enough. It can be leveraged to create opportunities for youth to further their businesses.

For example, a startup company in the tech industry could benefit significantly if it could obtain financing on the security of the IP rights comprised in its applications. It would then use these resources for product innovation or expand its growth for more profitability.

The big question is, how can this be achieved in Kenya? This is the third topic of My Chat With a Bank CEO by the Kenya Bankers Association (KBA).

Scheduled for the 25^th of March, this third edition of KBA’s CEO chat will feature Joseph Njuguna,  CEO Rafiki Microfinance Bank, as he delves into detail on intellectual property matters as possible collateral for youth loans.

Mr. Njuguna will highlight ways in which Intellectual Property—mainly developed by the youth— can be leveraged to facilitate access credit.

He will also explore opportunities to enhance business management skills among the youth to ensure that their businesses are guaranteed profitability and growth prospects.

If you want to become a part of the forum, you can register on chat.kba.co.ke, where the sessions will be hosted

The KBA chat sessions are open to all, and public members are encouraged to log on and engage in productive conversations on banking in Kenya.