Kenyans can now secure loans from any financial institution using crops or livestock as collateral; this after President Uhuru Kenyatta signed into law the Movable Property Security Rights Bill 2017, which enhances the ability to access credit using movable assets.
The new law allows the use of personal property as collateral for loans establishes an online collateral registry and creates the office of the Registrar of security rights.
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, a move that is likely to see bring more Kenyans access credit to boost their economic goals.
This is expected to revolutionize agricultural funding in the country especially for small holder farmers viewed as high risk by creditors, with statistics showing that only five per cent of all loans advanced by banks go to finance agriculture in a country whose 75 per cent of the population depends on agriculture as primary source of food.
According to SCOPEinsight, a multinational rating agency that measures strength and weakness of agricultural cooperatives, link them to NGOs and experts for technical assistance and recommend them to financial institutions for credits, the demand by banks for fix assets like land and auto mobiles as collateral restrains smallholder farmers from securing credit
‘’Smallholder farmers fear losing the only fixed asset-land to creditors, hence shying away from loans, explained SCOPEinsight’s Business Development Manager East Africa, Geoffrey Nyamota
With the new law, a coffee farmer can register his crop as an asset in the online registry, where lenders can search the database for credit information on both loan seekers and the movable asset used as collateral just like how land title deeds are used.
The new law is therefore expected to see more farmers secure credit to improve crop and livestock production, minimizing food insecurity in the country.
The law comes at the time when the country is struggling with food shortage and high inflation as a result of low food production owing to prolonged dry spell experienced from last year.