IMPACTS OF THE MOVEABLE PROPERTY SECURITY ACT ON SMEs IN

KENYA AND A COMPARATIVE ANALYSIS WITH SINGAPORE, NIGERIA AND

UGANDA

INTRODUCTION

On 10th May 2017, President Uhuru Kenyatta signed the Movable Security Rights Bill 2017
into law.1 This piece of legislation had the objective of facilitating the use of movable
property as a collateral for securing a credit line. 2 Moreover, this act establishes the office of
the Registrar of Security Rights and provides for the registration of security rights in movable
property.3

Another objective of the Act was to benefit Small Medium Enterprises (SMEs) who faced
numerous hurdles in accessing much needed finances from the formal sector for them to grow
their respective businesses and create profit.4

The Act repealed the Chattels Transfer Act (Cap 28) and the Pawnbrokers Act (Cap 529). 5
Moreover, several sections of the following Acts were amended6:

a) The Agricultural Finance Corporation Act (Cap 23)- The amendment made the
security rights created under the act to be within the scope of the MPSR Act.
b) The Hire Purchase Act (Cap 507)- The amendment removed the requirement to
licence hire purchase businesses, register hire purchase agreements, and the office of
the hire purchase agreements. It added the requirement to register notices with respect
to security rights created under the hire purchase right in the MPSR registry. It also
included other minor amendments that aligned to the terminologies in the MPSR Act.
c) The Stamp Duty Act (Cap 480)- The amendment removed the requirement of
stamping security agreements under the MPSR Act. It also included other minor
amendments to align terminologies with the MPSR Act.

1
‘Kenya: Movable Property Security Rights Act Enacted’ (Library of Congress, 18 May 2017)
<https://www.loc.gov/item/global-legal-monitor/2017-05-18/kenya-movable-property-security-rights-act-
enacted/>Accessed 8th June 2022.
2
ibid.
3
Supra note 1.
4
Njoroge Regeru & Company, ‘Analysis of the Movable Property Security Rights Act, 2017’ (Primerus)
<https://www.primerus.com/business-law-articles/analysis-of-the-movable-property-security-rights-act-
2017.htm> Accessed 8th June 2022.
5
‘Kenya Movable Property Security Rights Act, 2017’ (Bowmans: The Value of Knowing, 6 November 2017)
<https://www.bowmanslaw.com/insights/finance/moveable-property-security-rights-act-2017> Accessed 8th
June 2022.
6
ibid.

1
 d) The Business Registration Service Act (Act 15 of 2015)- Minor amendments were
made to align terminologies with the MPSR Act.

e) The Companies Act (2015)- The amendment added the requirement to register
debentures at the electronic MPSR Registry. It also included minor amendments to
align terminologies with the MPSR Act.

f) The Insolvency Act (2015)- The amendment led to the inclusion of the fact that
priority of competing floating charges shall be determined according to the MPSR
Act. there were also minor amendments to align terminologies with the MPSR Act.

Definition of Key Terms

Section 2 of the MPSR Act provides for the definition of the key terms that we shall highlight
in this section. The definition of securities is derived from Section 2 of the Capital Markets
Act Chapter 485A. It defines it as the rights under any depository receipt of shares, debt,
securities and warrants. ("depositary receipts").”

A security right is a property right in a movable asset that is created by an agreement to

secure payment or other performance of an obligation, regardless of whether the parties have
denominated it as a security right, and regardless of the type of asset, status of the grantor or
secured creditor, or the nature of the secured obligation.7

A collateral is a movable asset that is subject to a security right or a receivable that is the
subject of an outright transfer.8

A security agreement is an agreement, regardless of whether the parties have denominated it

as a security agreement, between a grantor and a secured creditor that provides for the
creation of a security right.

A grantor is a person that creates a security right to secure either its own obligation or that of
another person; a buyer or other transferee, lessee, or licensee of the collateral that acquires
its rights subject to a security right; and a transferor or in an outright transfer of a receivable.9

A secured creditor is a person that has a security right or a transferee in an outright transfer
of a receivable.10

7
Section 2 of the Movable Property in Security Rights Act, No. 13 of 2017
8
ibid
9
ibid
10
ibid

2
A borrower is the person to whom a credit facility is extended to by a secured lender. 11

BRIEF SETTING OF SMEs GLOBALLY AND IN KENYA

Small and medium Enterprises (SMEs) are defined as businesses that hire less than a
particular number of employees12 and maintain a particular number of assets and revenues
beneath a certain threshold.13

They are governed by the Micro and Small Enterprises Act No. 55 of 2012. The Act defines
small enterprises as a firm, trade, service, industry or a business activity whose annual
turnover ranges between five hundred and five Million shillings and which employs between
ten and fifty people.14

a) Globally

The number of employees is normally the basis of what is used to define SMEs. They vary
between countries as they each have their own standards. In the EU, the limit is 250, the
United States 500 and other countries have it at 200. Small firms generally have less than 50
employees while micro-enterprises have five or ten.15

Financial assets also determine what SMEs are. In the EU, SMEs are required to have a
turnover of 40 million Euros or less and the balance sheet valuation should not exceed the
maximum of 27 million Euros.16

SME are the backbone of many global economies and serve as the main source of
employment. They account for 95 percent of business globally and provide for 60 to 70
percent of employment and are responsible for two-thirds of the total private sector
employment.17 They are key to economic growth, innovation, job creation, global supply
chains (as both buyer and

11
Business Registration Service, A Handbook on the Movable Property Security Rights Act (1st edn Business
Registration Service 2020).
12
‘Small & Medium-Sized Enterprises (SMEs)’ (OECD, 4 December 2005)
<https://stats.oecd.org/glossary/detail.asp?ID=3123> Accessed 8th June 2022.
13
Daniel Liberto, ‘Small & Mid-Sized Enterprise (SME) (Investopedia, 7 September 2021)
<https://investopedia.com/terms/s/smallandmidsizeenterprises.asp> Accessed 8th June 2022.
14
Section 2, Micro and Small Enterprises Act.
15
‘Small &Medium-Sized Enterprises’ (National Action Plans on Business & Human Rights)
<https://globalnaps.org/issue/small-medium-enterprises-smes/> Accessed 8th June 2022.
16
Ibid.
17
Supra, note 15.

3
seller) and social integration as they offer close relations with business partners, employees
and the local community.18

b) Kenya

SMEs have been part of the GoK’s policy priority since independence. 19 This was followed
by the establishment of the Kenya Industrial Estates (K.I.E.) in 1967, as a subsidiary of the
Industrial and Commercial Development Corporation (I.C.D.C). Its work was to promote
indigenous entrepreneurship by financing and developing small scale and micro enterprises.
The government began to bring in SMEs as a priority sector as their numbers increased.20

SMEs are part and parcel of the Vision 2030 (which seeks to turn Kenya into an
industrialised middle-income country by the year 2030) so much so that it has been
incorporated into the Medium-Term Plans.21

SMEs in KE contribute to 40 percent of the GDP with a majority in the informal sector. Out
of a total of 7.41 million SMEs in the country, only 1.56 are licensed. 22 The value of SMEs
output is valued at 3,371.7 billion against a national output of 9,971.4 billion. This is a 33.8
percent rise in 2018.23

BACKGROUND OF THE MPSR ACT

Access to credit is essential for the growth of any enterprise within the economy. SMEs were
less likely to be able to obtain bank loans than their counterparts (large firms) and instead
relied on internal funds or cash from friends and family to launch and run their enterprises.
This was often due to their limited track record, inadequate financial statements as well as
limited acceptable collateral security. Due to the constraints of accessing credit, SMEs were
unable to grow their businesses in emerging markets especially in developing countries.

18
Supra, note 15.
19
Sessional Paper No. 10 of 1965 on African Socialism and Its Application to Planning in Kenya.
20
Sessional Paper No. 1 of 1986 Economic Management for Renewed Growth.
21
‘Kenya Business Guide’ (History & Context) <https://kenyabusinessguide.org/history-context> Accessed 8th
June 2022.
22
Phyllis Wakiaga, ‘The Focus on SMEs is a welcome intervention’ (Kenya Association of Manufacturers)
<https://kam.co.ke/the-focus-on-smes-is-a-welcome-intervention/> Accessed 8th June 2022.
23
Keziah Kinuthia, ‘SMEs driving Kenya’s economy’ (Nation, 24 February 2020)
<https://nation.africa/kenya/news/politics/smes-driving-kenyas-economy-253732> Accessed 8th June 2022.

4
Following a study by the Financial Sector Deepening Kenya (FSD-K), it was found that there
existed a multitude of fragmented laws in Kenya in respect to the use of collateral as security
to access credit. Compliance with all these laws resulted in problems and challenges that
were a hindrance to those SMEs that were in need to access finance to grow their businesses.
The study showed the extremely weak and disorganised legal framework for use of personal
property as collateral to access credit. Following this, the World Bank in 2013 published a
report on a survey on SMEs whereby they concluded that reforms in the market with respect
to movable assets greatly increased access to credit for micro, small and medium enterprises.
It is on the basis of these findings that the foundation for the development of a consolidated
and comprehensive movable collateral regime was laid in Kenya. The Movable Property and
Security Rights Act, 2017 was thus enacted to combat the inefficiency of a previous regime
that was marred with a multiplicity of applicable statutes in respect to collateral, which were
outdated and insufficient for the modern-day economy.

(INCLUDE FOOTNOTES)

2.2: Previous Regime

Prior to the enactment of the MPSR Act, there were several fragmented statutes that governed
the use of movable property as collateral for credit. These were, the Chattels Transfer Act,
Pawnbrokers Act, Agriculture Act, Stamp Duty Act, Hire Purchase Act, Business
Registration Services Act, Companies Act, Law of Contract Act and Registration of

Documents Act, among others. These laws proved to be problematic and were marred with
challenges that hindered the access to credit by SMEs. Some of the challenges were;

a) There was no clear definition of the assets for collateral and the scope for personal
property was limited. It did not envision the use of assets such as intellectual property,
livestock, and crops among many others.

b) There were multiple registry systems provided for by the numerous different statutes
which created difficulties in establishing credit histories and priority rights since the registries
were physical and manual.

c) The enforcement mechanisms were weak, lengthy and costly. Lenders had to undergo
lengthy Court procedures to recover in cases of default.

Due to the challenges of this regime, many SMEs were unable to secure credit from financial
institutions to grow their business enterprises.

2.3: Current Regime

5
The Movable Property and Security Rights Act 2017 came into force on 16th May 2017 as
the legal framework governing movable collateral. The Act aimed at creating an efficient and
effective framework for the various stakeholders particularly SMEs on the use of movable
property as collateral for credit. The move was in a bid to increase access to finance by SMEs
thus contributing towards the overall growth of the country's economy. The objectives for the
MPSR Act are;

ii. To establish the Office of the Registrar of Security Rights to facilitate registration of
security rights in movable assets.

iv. To promote consistency and certainty in secured financing relating to movable assets.

v. To enhance the ability of individuals and entities to access credit using movable assets.

This Act enables borrowers to make use of their personal property as collateral for credit. The
Act diversifies the type of movable collateral that constitute as security such as Chattel
mortgage, Credit Purchase transaction, Pledge, Floating and fixed charge, Credit Sale
Agreement, Trust indenture, Trust Receipt, Financial Lease and every transaction that
secures payment of performance of an obligation.

The Act has even taken a step further to categorise movable assets into two:

i. Tangible assets such as motor vehicles, crops, machinery, livestock, business

inventory, electronics and furniture.

ii. Intangible assets such as account receivables, choses in action, account savings or
deposits, unpaid invoices, electronic, securities, shares and intellectual property among
others.

The Act has embodied the 21st Century modern credit and digital economy particularly by
harnessing the value of intellectual property. A move that can be said to be revolutionary for
borrowers who seek to use their intellectual property such as a trademark to access finance.
Such a scenario has been brought forth in an article whereby the writer suggested that
Nakumatt’s insolvency issues may have been resolved through the use of their trademarked
name ‘Nakumatt’ to secure finances to pay off their creditors.

6
In line with its objective to promote certainty and consistency, the Act has established a
collateral registry. The Registry acts as a public notice to any other entity interested in the
collateral that there is a prior interest. This choosing to lend against the same collateral would

result in the lender having second priority in the event of default by the borrower. This
creates a secure environment for the lender.

The Act goes on to provide for enforcement procedures in the event of default by the
borrower. It provides that a secured creditor under the Act may exercise their enforcement
right either by application to the court or using other remedial options such as appointment of
a receiver, lease the movable asset, taking possession of the movable asset, and sale of the
movable asset.

IMPACT OF THE MPSR ACT ON SMEs IN KENYA

SMEs form 80% of the country’s economy. Prior to the Moveable Property Security Act,
small medium enterprises (SMEs) could not obtain any financial help from banks as they did
not have any real property to offer as security, which was the most preferred mode of
collateral.24The Act brought a relief to many SMEs as it enables borrowers to make use of
their personal property as collateral for credit.

The Act recognizes intangible assets such as Intellectual Property (IP), Receivables, choses in
action, unpaid invoices and account receivables as collateral. These Intangible Properties
were not recognized as items capable of forming security prior to the Act. 25A security right in
intangible assets is created by an agreement which must be in writing, identifies the parties,
signed by the grantor, defines the assets and describes the obligation.26The security right can

24
Margaret Ndonji, ‘The securitization of intellectual property in Kenya’ January
18,2002(file:///C:/Users/user/Documents/COMMERCIAL%20TRANSACTIONS/THE%20SECURITIZATION
%20OF%20INTELLECTUAL%20PROPERTY%20IN%20KENYA%20%E2%80%93%20Mitullah%20Shako
%20&%20Associates.html) accessed on 4th June 2022.

25
Margaret Ndonji, ‘The securitization of intellectual property in Kenya’ January 18,2002
(file:///C:/Users/user/Documents/COMMERCIAL%20TRANSACTIONS/THE%20SECURITIZATION%20OF
%20INTELLECTUAL%20PROPERTY%20IN%20KENYA%20%E2%80%93%20Mitullah%20Shako%20&
%20Associates.html) accessed on 4th June 2022.

7
be on the whole part or on a part of the specific intangible asset or on a portion of or the
whole of the debtors’ assets.27

Intellectual property

The Act defines Intellectual property to include; Copyright as defined in Section 2(1) of the
Copyright Act, 2001, Industrial property rights as defined in Section 2(1) of the Industrial
Property Act, 2001, Trade mark as defined in Section 2(1) of the Trade Marks Act, Cap 506
and any other related right.28Thus, the borrowers can use their IP assets, that is, trademark,
copyright, patents, utility models and industrial designs as collateral to secure loans.

This is done through the securitization of the IP rights. Securitization is the consolidation of
future payments like royalties and selling them as security 29 therefore the creditor will have
the right to receive premiums or royalties or profits directly out of the use and enjoyment of
the asset.30The conversion makes it a marketable collateral. It is noteworthy, that for a
borrower to use their IP rights as security, they should register it under Kenya Industrial
Property Institute (KIPI) and then perfect it at the registry.

Account Receivables

26
Section 6(3), Moveable Property Security Act (No, 13 of 2017).

27
Section 7(1), Moveable Property Act (No. 13 of 2017).

28
Section 2, Moveable Property Security Act, (No. 13 of 2017).

29
Margaret Ndonji, ‘The securitization of intellectual property in Kenya’ January 18,2002
(file:///C:/Users/user/Documents/COMMERCIAL%20TRANSACTIONS/THE%20SECURITIZATION%20OF
%20INTELLECTUAL%20PROPERTY%20IN%20KENYA%20%E2%80%93%20Mitullah%20Shako%20&
%20Associates.html) accessed on 4th June 2022.

30
Section 16, Moveable Property Act (No. 13 of 2017).

8
Also referred to as debts owing to the borrower. This type of collateralization works by
pooling many account receivables owed to the borrower. The payments by account
receivables are used as security to the repayment of loans owed to lenders.31

This type of collateralization can be achieved through Account Receivable Financing

Practices. Account Receivable Financing Practices has been defined to mean any type of
financing which relies on Account Receivables as a collateral or an eligibility requirement. 32
The financing options include securitization of AR (both on and off-balance sheet),
factoring of receivables, AR collateralized debt, and general collateralized debt which
contains an AR eligibility requirement.33

To begin with, Factoring involves the purchasing of receivables or invoices. The SMEs
inform their debtors that payment should be remitted to the financing agency. Once the loan
is completely paid off, the borrower is given the balance with less interests involved. An
example of a financial institution that accepts account receivables is the Kopo Kopo
Company. An example is given of one James, an SME who runs a popular bar and restaurant
on Lenana Road,

Nairobi.34 Just like many SMEs, he could not get any bank loans to boost his business. 35
James did not have collateral or robust records, but he received payments via debit card and

31
Joan Mukoya,’ Alternative Collateral to securing a loan’ loan’ (https://koyaadvocates.co.ke/alternative-
collateral-to-secure-a-loan/) last accessed on 4th June 2022.

32
Mary Nelima Lyani (Sindani), ‘Effects of Account Receivables Financing Practices on growth of SMEs in
Kakamega County, Kenya’ 18th February, 2018 ( https://finance.expertjournals.com/23597712-601/) last
accessed on 4th June, 2022.

33
ibid.

34
Benjamin Lyon.’ Mind the gap: Empowering Kenya’s SMEs through alternative landing’
(https://www.smefinanceforum.org/post/mind-the-gap-empowering-kenya%E2%80%99s-smes-through-
alternative-lending) last accessed 4th June, 2022.

35
ibid.

9
mobile money, which means a percentage of his receivables is verifiable. 36 The company
gave him an unsecured merchant cash advance attached to his receivables.37

Invoice discounting is another alternative to collateralization of movable properties as

security for SMEs. It involves the borrowing against invoices that have been raised.38

A study conducted to ascertain the influence of financial practices on growth of SMEs in

Kakamega established that 58% used account receivables as collateral for a loan, 56.7%
securitized account receivables while 51.5% factored account receivables.39 The study
indicated that the SMEs in Kakamega use account receivables as collateral which in turn
helps them increase their business. On the other hand, 56% discounted overdue invoices. This
ensures that money is not tied up to invoices or remain idle in a long time.40

In addition to the intangible assets, the MPSR Act also enables SMEs to obtain loans using
tangible assets like livestock, vehicles, crops, and any household items. This initiative has led
to an increased number of loans at 61.1% in a period of six (6) months.41 Notices lodged by

banks and microfinance to secure interest of a movable collateral in order to issue loans were
recorded at 58,287 in the half year compared to 36,176 notices made in the same period last
year.42

36
ibid.

37
ibid.

38
Mary Nelima Lyani (Sindani),’ Effects of Accounts Receivables Financing Practices on Growth of SMEs in
Kakamega County, Kenya’ 14th February, 2018 ( https://finance.expertjournals.com/23597712-601/) last
accessed on 4th June, 2022.

39
ibid.
40
ibid.
41
Elizabeth Kivuva,’ Loans issued against cows, Tvs, stocks rise 61pc in first six months’ 24 th August 2021
(file:///C:/Users/user/Documents/COMMERCIAL%20TRANSACTIONS/Loans%20issued%20against
%20cows,%20TVs,%20stocks%20rise%2061pc%20in%20first%20six%20months%20_%20Business
%20Daily.html) last accessed on 4th June 2022

42
Iid

10
An inventory of stock can be used for borrowing, this may be an inventory of current/existing
or future stock. The lender, in determining whether the inventory can be used as collateral,
will consider whether; the inventory is saleable, highly perishable or if it consists of finished
or half-finished goods.43

Negative impact

Although the Act has enhanced access to credit facilities through movable property as
collateral, it does not provide any ways of verifying ownership of the registered notice on
movable property in their name, and is indeed the owner of the property, which could lead to
disputes regarding ownership on registration. 44 There is risk of double registration due to
lack of regulatory consolidation.

Section 4 (a) of the Act includes security rights in movable assets as “ every transaction
that secures payment or performance of an obligation, without regard to its form and
without regard to the person who owns the collateral”.45 Movable assets that are seen as
inadequate collateral, for example, household equipment or personal assets have led to the
unsuccessful funding of some SMEs for failure to meet lending requirements, as the Act does
not compel any banking institution or any lender to accept such movable assets as collateral,
which they deem inadequate. 46
There is no standard way of description of movables by the
Act.

The Act does not outright provide for lenders or their personnel to provide the borrower with
all information as they should. Information asymmetry has hindered a good lender- borrower
relationship, which is between the lending institutions and borrowing SMES.47

No creditor is willing to finance an SME that has not proven concept e.g., Kune foods, which
had a concept of providing cheaper food to office workers. However, an SME, might have
proved its concept, but not profitable, e.g., Twiga foods. The Act has not provided an
incentive of default for borrowers making it difficult for lenders to accept the collateral

43
Joan Mukoya,’ Alternative Collateral to secure a loan’ (https://koyaadvocates.co.ke/alternative-collateral-to-
secure-a-loan/) last accessed on 4th June 2022.

44
https://www.primerus.com/business-law-articles/analysis-of-the-movable-property-security-rights-act-
2017.htm
45
Movable Property Security Rights Act No. 13 of 2017.
46
https://www.primerus.com/business-law-articles/analysis-of-the-movable-property-security-rights-act-
2017.htm

47
Binam Ghimire &Rodrigue Ado on “An empirical investigation of Ivorian SMEs' access to bank Finance:
constraining factors at demand level”.

11
provided. Most SMEs have neither invested in physical infrastructure, business services nor
implemented the capacity of policy makers, local level administrators and support structures
which determine their success. Hence the borrower has a higher burden of proving their
credit worthiness.

No legal framework for IP for easier administration-uncertainty, infringement of one's

privacy may limit acquisition of, kcredit.

Statistics

It is important to conduct a search before registration of a notice to ensure priority and

perfection.48 It is upon statistical analyses of searches on the one hand, and notices on the
other that we assess the impact of the MPSR on SMEs in Kenya. This means the recorded
number of registrations versus searches conducted in the collateral registry. The statistics
have been captured and tabulated by the BRS from inception of the registry in the year 2017
to date.49

The year 2017/2018 recorded a total of 101,718 notices of security rights registered against a
total of 3,990 searches done. Searches done were extremely low compared to the number of
notices registered. Additionally, 2018/2019 recorded a total of 120,380 notices of security

rights registered against a total of 17,165 searches done.50The number of searches done, and
notices registered went up.

48
Business Registration Service, A Handbook on the Movable Property Security Rights Act (1st edn Business
Registration Service 2020), available at https://brs.go.ke/assets/downloads/MPSR%20HANDBOOK.pdf

49
https://brs.go.ke/mpsr-ststistics-2022.php

50
https://brs.go.ke/mpsr-ststistics-2022.php

12
Further, 2019/2020 recorded a total of 138,473 notices of security rights registered against a
total of 21,013 searches done. The number of searches done, and notices registered went
higher than the previous years. The following year 2020/2021 recorded a total of 102,637
notices of security rights registered against a total of 18,665 searches done. 51When compared
to the overall market, more than 10% of the total loan accounts in the market have been
registered.

Finally, the year 2021/2022 has recorded a total of 96,502 notices of security rights registered
against a total of 19,297 searches done so far. 52 It is important to note that this is the position
as of April 2022. The trend of increase in searches and rise in notices’ registration strengthen
the expectation that the figures will grow before the year ends.

Statistics show that the notices registered are usually more than the searches done each
month, that is, an average ratio of about 9:1 since the establishment of the e-registry. When
compared to the overall market, more than 10% of the total loan accounts in the market have
been registered. This is a positive indicator of growing access to credit which in turn
improves the ease of doing business.53

In 2019 a FinAcess Survey by the Central Bank of Kenya showed that Kenya has made
significant milestones in expanding access to financial services and products to 82.9 percent
in 2019 from 75.3 percent in 2016. The data further shows that nearly a third of the new loans
of KShs.150.56 billion issued by commercial banks used household goods, live animals and
office equipment as collateral.54

Another study noted an increase from Kshs. 19.6 billion to Kshs. 43.5 billion worth of loans
accessed using movable securities. Collateral requirements however continue to be a major
barrier for SMEs in accessing formal credit. Ongoing reforms such as the strengthening of the
moveable assets’ registry and appropriate security enforcement mechanisms would therefore

51
https://brs.go.ke/mpsr-ststistics-2022.php

52
https://brs.go.ke/mpsr-ststistics-2022.php

53
Business Registration Service, A Handbook on the Movable Property Security Rights Act (1st edn Business
Registration Service 2020).
54
Central Bank of Kenya (2019) FinAccess Household Survey, at 8, available at
https://www.centralbank.go.ke/uploads/financial_inclusion/2050404730_FinAccess%202019%20Household
%20Survey-%20Jun.%2014%20Version.pdf

13
go a long way in enhancing the bankability of SMEs among lenders and easing SMEs’ access
to credit.55

Case analysis (INCLUDE ANY RELEVANT CASE LAWS)

3.5 IN THE WAKE OF COVID-19

55
Central Bank of Kenya (2020) MSME FinAccess Business Survey Report, , at 36, available at
https://www.centralbank.go.ke/uploads/banking_sector_reports/1275966539_2020%20Survey%20Report
%20on%20MSME%20Access%20to%20Bank%20Credit%20-%20Final%20-%2015%2007%2021.pdf

14
Covid-19 has impacted businesses on a national and global scale. There have been several

restrictions on trade as governments introduced measures to contain the spread of the

virus.56These restrictions have hindered the flow of goods and services and enhanced

significant uncertainty.57 The most common challenge for SMEs as a result of the pandemic

has been repayment of loans. Entrepreneurs have struggled to repay the loans taken during

the pandemic and penalties on old loans as a result of delays in instalments. 58Financial service

providers have also been reluctant to offer discounted interests because the pandemic has

similarly had a negative impact on their cash flows.59

According to statistics, 20 percent of enterprises surveyed in December 2020 reported

reduced credit from lenders, compared to 17 percent in July and 19 percent in

September.60These enterprises further reported that they could only secure their supplies with

upfront cash

56
Kaberia Salome and Stephen Muathe, "Effect of Covid-19 pandemic on performance of women owned micro,
small and medium Enterprises in Kenya." (2021) 9 Int'l J. Soc. Sci. Stud. 7-10, 8.

57
Mutwiri Nathan Mwenda. "Covid-19 financial distancing for MSMEs in Kenya." (2021) 10(3) International
Journal of Research in Business and Social Science (2147-4478) 357-362, 359.

58
Noor, Fidow Abdikadir. "Effect of covid-19 on loan repayment of small businesses in Kenya: A case study of
Eastleigh business community." (2020) 5(2) European Journal of Business and Strategic Management 5, 1-14,
9

59
Noor, Fidow Abdikadir. "Effect of covid-19 on loan repayment of small businesses in Kenya: A case study of
Eastleigh business community." (2020) 5(2) European Journal of Business and Strategic Management 5, 1-14,
2

60
https://scbf.ch/wp-content/uploads/2021/02/Impact-of-COVID-19-on-Kenyan-MSMEs-2020.pdf

15
payment. As a result, liquidity issues amplified. 61In addition, 9 percent of the respondents of

the survey noted that lenders offered less credit compared to the pre-Covid-19 period. 62

Moreover, a number of enterprises have since defaulted on payments to lenders. This has

significantly reduced the ability of these lenders to offer more loans to SMEs.

The pandemic has had devastating impacts on SMEs in terms of disruptions in cash flows and

overall operations of the business. There is significant difficulty in balancing between current

capital requirements for business, operating expenses and servicing existing loans.63 As a

result, more SMEs need even more credit to resume business operations. For instance, in

December 2020, almost nine months after the first case of Covid-19 was reported in Kenya,

50 percent of SMEs respondents reported to have applied for loans, compared to 39 percent

in September.64However, several SMEs continue to struggle to access credit due to previous

overdue loans and inability to meet collateral requirements.

From the forging, the Covid-19 pandemic has had significant effects on access to credit as

well as the demand for credit for SMEs. The pandemic has affected the ability of financial

institutions to provide credit as well as their willingness to give more loans due to the

increased

61
https://www.microsave.net/wp-content/uploads/2021/01/210107-SCBF-Impact-of-COVID-19-on-MSMEs-
post-design-DE-sm_KS-1.pdf

62
https://scbf.ch/wp-content/uploads/2021/02/Impact-of-COVID-19-on-Kenyan-MSMEs-2020.pdf

63
Mutwiri Nathan Mwenda. "Covid-19 financial distancing for MSMEs in Kenya." (2021) 10(3) International
Journal of Research in Business and Social Science (2147-4478) 357-362, 361

64
https://scbf.ch/wp-content/uploads/2021/02/Impact-of-COVID-19-on-Kenyan-MSMEs-2020.pdf

16
number of defaulters.65 Most financial institutions have added more terms and conditions on

the loans offered. For instance, the survey showed that out of the SMEs that applied for loan,

66 percent reported to have received loans according to their requests, while 17 percent

reported to have received loans with added terms and conditions.66Some of these conditions

included the requirement for collateral and risk premiums. Therefore, the pandemic has

definitely increased the need for the use of movables as collateral as provided for in the

MPSR Act for SMEs. This is because lenders have become more cautious with their lending

and these businesses urgently need the funding to continue with operations and deal with the

devastating effects of Covid-19. More so, the government has encouraged businesses to lodge

details of their assets at the movable assets’ registry under the BRS, which is accessible to

banks.67

65
Mutwiri Nathan Mwenda. "Covid-19 financial distancing for MSMEs in Kenya." (2021) 10(3) International
Journal of Research in Business and Social Science (2147-4478) 357-362, 360

66
https://scbf.ch/wp-content/uploads/2021/02/Impact-of-COVID-19-on-Kenyan-MSMEs-2020.pdf

67
https://www.standardmedia.co.ke/business/news/article/2001396245/register-your-crops-cows-to-secure-loans

17
CHAPTER FOUR: COMPARATIVE ANALYSIS

Introduction

There are numerous countries in the world that possess a personal property security rights
regime. This chapter therefore provides a comparative analysis with the systems in Uganda,
Nigeria as well as Singapore. The aforementioned countries have been selected primarily
because, just like Kenya, they are common law jurisdictions. This chapter delves into how, or
whether, the personal property security rights regimes in these nations have enhanced access
to credit for SMEs.

4.0: UGANDA

Uganda enacted the Security Interest in Movable Property (SIMPA) in 2019. The main
objective was to provide for the use of movable property as security for both individuals and
corporations as well as provide for the priority, registration and enforcement of security
interest.

The property that can be used as security under SIMPA include tangible asset and intangible
assets such as intellectual property, negotiable instruments and judgement in lien. These
assets help SMEs who struggle to access credit from lending institutions due to lack of fixed
assets.

According to SIMPA security interest is created by a transaction that secures payment or

performance of an obligation.68
For the agreement of the security interest to be enforceable:
I. The grantor or the owner must have a right in the collateral or the power to encumber
the collateral.69
II. The agreement must be signed by the grantor, witnessed by a third party and it should
identify the secured creditor and the grantor.70

68
Overview of Security Interest in Movable Property Act
http://mukumbyamusoke.com/4017-2/
69
See Section 4 of Security Interest in Movable Property Act 2019
70
See Section 4(3)(b) of Security Interest in Movable Property Act 2019

18
Additionally, the agreement should describe the collateral and the secured obligation in a
manner that reasonably allows for identification. It should also indicate the maximum amount
for which the security interest is enforceable, and the secured creditor should give the
monetary value of the collateral.71

SIMPA further provides for the following methods of perfecting the security interest72
I. Notice of the security interest in the collateral entered in the register.73

II. Taking possession of the collateral by the secured creditor or the person acting on
behalf of the secured creditor.74

III. Taking control of a deposit account where the collateral is a deposit account by the
secured creditor or a person acting on behalf of the secured creditor.75

With regard to perfection of security by registration, it introduces an online electronic

registration process known as the Security Interest in Movable Property Registry Systems
(SIMPRS).
The electronic registration process makes it easy for the lenders who are registered on the
system to perfect their interest at any time of their choice.

The registry acts as a public notice to any other entity interested in the collateral that there is
a prior interest and if they choose to lend against the same collateral, they will be second or
third in priority in case of default.76

In Uganda, the rules of priority of interest vary depending on the movable property in
question. The priority between security interest is determined as follows:
I. Perfected security interest takes priority over an unperfected security interest 77

71
http://mukumbyamusoke.com/4017-2/
72
See Section 12 of Security Interest in Movable Property Act 2019
73
See Section 12(a) of Security Interest in Movable Property Act 2019
74
See Section 12(b)of Security Interest in Movable Property Act 2019
75
See Section 12(c) of Security Interest in Movable Property Act 2019
76
Business Registration Service, A Handbook on Movable Property Security Rights Act.
77
http://mukumbyamusoke.com/4017-2/verview of Security Interest in Movable Property Act

19
 II. Priority between perfected security interest is determined by the order of
whichever of the following actions occurs first:
a) The registration of the initial notice.
b) The secured creditor or someone acting on their behalf taking possession of the
collateral.
c) The secured creditor or another person on their behalf acquiring control of the
collateral.
d) Priority between unperfected security interests in the same collateral is determined by
the creation of security interest.

The Act provides for enforcement procedures in the event a borrower defaults. It provides
that upon default, a secured creditor may enforce the security interest by exercising any right
provided for under the Act (WHAT DOES THE ACT PROVIDE?), security agreement or
any other written law.78

The secured creditor should serve a notification on the grantor in writing or in a form agreed
by the parties to pay the money owing or to perform and observe the agreement.
The secured creditor may register a default and enforcement notice where the debtor does not
remedy the default within the time provided for in the notification in the event that the
security interest is perfected by registration.

If the security interest is perfected by other means (ILLUSTRATE THE OTHER

METHODS OF PERFECTION) other than registration, the secured creditor may act under
the Act which is taking possession of the collateral with or without a court order and sale of
the collateral which must be by auction.

SIMPA widens the scope of movable property that can be used to access credit facilities
which is very important to SMEs.
As a result, SMEs can now access credit from financial institutions using all sorts of tangible
and intangible assets as security as opposed to previous reliance on land and tangible
movable property.

78
See Section 44 of Security Interest in Movable Property Act 2019

20
Comparative analysis between Kenya and Uganda

Similarities

a) In both countries borrowers are allowed to use their personal property as collateral for
credit, which include the use of tangible and intangible assets such as intellectual property as
possible collateral.79

b) In both countries the borrowers may use one collateral as security in many credit facilities.

c)In both countries a collateral registry is established which has provisions to protect the
lender in case of default by the borrower.

d)Both countries introduce simpler ways of creating securities over Movable property by
prescribing requirements that have to be met in order for a security agreement to be
enforceable.

Differences

In Uganda, SIMPA provides for specific offences which include filing a notice with
fraudulent or malicious intention, submission of false statement or representation for
purposes of deceiving the Registrar general and making of false statement or
misrepresentation.

It further provides for the penalty of the above offences, that is, imprisonment not exceeding
two years or a fine not exceeding two hundred currency points or both. 80In Kenya, the MPSR
does not clearly set out the offences.

79
Business Registration Service, A Handbook on Movable Property Security Rights Act.
80
http://mukumbyamusoke.com/4017-2/ Overview of Security Interest in Movable Property

21
4.2: NIGERIA

Introduction

Nigeria, like other countries in Africa, has not been left behind in creating and enacting laws

that govern the securitization of personal property.

Nigeria enacted the Secured Transactions in Movable Assets Act, (STMA) in 2017, with the

intention to improve financial inclusion and access to affordable debt finance by micro, small

and medium enterprises.81The act was also enacted in order to provide regulation on the

creation, perfection, and realisation of security interests in movable assets.

According to Mike A.A. Ozekhome, Personal Property Law in Nigeria 2019, various issues

surrounding access to funds and financing for SMEs prompted the enactment of the movable

properties Act. These issues include:82

a) The state of the law was not favourable for easy access to affordable credit.

b) The law was compartmentalised, obsolete, and did not provide for a

registration system for the problem of ostensible ownership.

c) No credit reporting system existed that would enable secured lenders to rate

the creditworthiness of borrowers, this, therefore, led to high-interest rates.

d) High-interest rates that are offered by banks and financial institutions

81
Igbinosun, Betha. (2020). Security Interests in Personal Property and the Nigerian Secured Transactions in
Movable Assets Act 2017: An Appraisal. Journal of African Law. 64. 1-15. 10.1017/S0021855320000157.

82

22
 e) Lack of clarity in the law on whether a lender was entitled to utilise self-help

in repossessing the borrower’s collateral in the event of default.

(footnote)

Nature and Scope of the Personal Property Regime in Nigeria

Objectives of the Act

The objectives are provided under section 1 of the Act, and they include83

a) Enhancing financial inclusion in Nigeria,

b) Stimulating responsible lending to micro, small and medium enterprises,

c) Facilitating access to credit secured with movable assets,

d) Facilitating perfection of security rights in movable assets,

e) Facilitating realisation of security interests in movable assets and

f) The establishment of a collateral registry and providing for its operations.

As per the objectives stated above, it is clear that the intention of the legislators was to enable
individuals, and SMEs to use their movable property to secure credit, in order to enhance
their livelihoods or those of their businesses.

The establishment of the registry has allowed for the registration of security interests; the
creditor, therefore, receives a notice and is aware of any encumbrances on the security right.
This provision has abolished the criteria that were previously used by the courts as was
provided for in Dearle v Hall which requires priority to be determined in the order in which

83
See section 1 of the Secured Transactions in Moveable Property Act

23
holders of assigned equitable rights in the account gave notice to the debtor, as a system of
perfection.

Types of security interest in Nigeria

Under the Nigerian STMA Act, there are various types of security interests. They include
both tangible and intangible property. Some of the recognised types of intangible personal
property that can be used as security they include Intellectual property; this includes
trademarks, patents, copyrights, designs etc which is granted by way of fixed charge or an
assignment by way of a security.84

Other examples of movable personal property that can be used as security include plants,
machinery, insurance proceeds, aircrafts ships and vessels etc.

Creation of a Security Interest

Section 3 of the STMA Act, provides for the creation of the security interest. These interests

are created from a security agreement between the grantor and the creditor once the security

interest is created no further consent or action is required from the grantor.

Section 5 provides for the contents of a valid security agreement. They include Reflection of

the intention of the grantor and creditor to create a security interest, Identity of the grantor

and the creditor, Description of the secured obligations, including the maximum amount

enforceable in the security interest, Description of the collateral, description of the tenure of

the obligation secured and A confirmation of the agreement by parties to submit to

arbitration, as the first method of recourse in the event that a civil dispute arises

84
Latham and Watkins, taking security in Africa, A comparative guide for investors,2017
https://www.lw.com/admin/Upload/Documents/Taking%20Security%20In%20Africa/Taking-Security-in-
Africa-Complete.4.pdf

24
The National Collateral Registry

Section 11 of the Act provides for the establishment of a National Collateral Registry, under

the wing of The Central Bank of Nigeria. The functions of the registry would include

Receiving, registering, and storing information about security interests in movable assets,

providing access to persons seeking information on security interests from the registry as well

as other related functions provided under the Act.85

Perfection of Security Interests

With reference to the role of the National Collateral Registry to ensure the registration of

security interests, Perfection of a security interest is accomplished by filing a financing

statement with the national Collateral Registry. This is provided for under section 8 of the

Act.

Perfection, also known as “third party effectiveness”, gives notice to other persons (creditors)

of the existence of a security interest on a particular collateral.

This section was enacted in order to minimise situations whereby a borrower could create

more than one security interest on one collateral and obtain credit from different creditors that

outweighed the overall value of the collateral. There was no way a creditor would be aware

of pre-existing interest previously created by the borrower.

Priority of Secured Interests

85
See Section 11 of the Secured Transactions on Movable Assets Act 2007

25
Section 23 (1) of the STMA Act provides for the priority of security interests, it expressly

states that the priority between perfected security interests in the same collateral shall be

determined by the order of registration in the collateral registry.

This means that if two or more security rights are created over the same collateral,

determining priority will be based on the order in which they were registered and not in the

order in which they were created. This provision is aimed at eliminating or curbing the

existence of secret liens. Section 23 of the act however does not abolish the creation of secret

liens; it accords priority to secured creditors and registered interests first.

Enforcement of Security Interests

Enforcement is the method in which a creditor gets back his money in the event that a debtor

defaults in paying his debt or becomes insolvent.86The aim of being secured is to ensure that

the secured creditor could enforce and be able to recover most if not all of his financial

investment given to the debtor in the event of late payment or bankruptcy.

The act further provides for possible remedies that may be used by the creditor in the event of

default. Section 39(1) provides for enforcement of this right through judicial remedies or

other methods provided for under the Companies and Allied Matters Act.87

86
Mike A.A Ozekhome, Personal Property Law in Nigeria.

87
See Section 39(5) of the Secured Transactions in Movable Assets Act of 2017

26
The means available for enforcement of security rights include: 88 taking possession, power of

Sale, the appointment of a receiver, foreclosure, or taking action to court.

Comparative Analysis between Kenya and Nigeria

Similarities

To begin with, it is prudent to acknowledge the need for laws and regulations that would

govern movable personal property. This is seen by the fact that both Kenya and Nigeria have

enacted the Movable Property in Security Rights Act of 2017 and the Secured Transactions in

Movable Property Act of 2017 respectively.

The most striking similarity between the two legislation is the fact that both acts aim at

providing alternative lending solutions to SMEs in order to ensure their smooth day-to-day

running as well as protecting the creditors and ensuring that they are able to recover the

financial investment given to the debtor.

Similarly, both Acts aim at providing rules, laws, and guidelines that would govern the

creation of security interests, their perfection, and the protection of the interests of both

parties until the point of discharge of such interests. Both acts also provide for solutions in

the event of default of payment by the borrower.

Differences

One of the main differences between the two personal property regimes is the arbitration

clause that is provided for under section 5 of the STMA act. It provides that parties should

first submit

88
See Section 39(5) of the Secured Transactions in Movable Assets Act of 2017.

27
to arbitration as a method of recourse in the event of any civil disputes that may arise

between them.

This however is not the position when it comes to the Kenyan MPSR Act.

Another difference between the two regimes is that in Nigeria, vessels, ships and aircrafts can

be used as security under a securities agreement however in Kenya the provision on Ships,

Aircrafts and Vessels do not fall within the realm of MPSR, for the Act does not allow the

adoption of MPSR on objects that are covered under Kenyan Acts.

28
Singapore

The nature of securitisation law in Singapore

By virtue of being a common law system, credit and security law in Singapore is mostly
based on English law. Therefore, traditional common law forms of interests such as pledges,
mortgages, lien and equitable charges are acknowledged and adopted by Singapore law.89

The regulatory regime in Singapore concerning securitisation is determined by the nature of

the asset being secured. Singapore does not possess a central regulatory body which
maintains a register of all security interests. Specific statutory bodies have oversight over
particular assets. Therefore, any encumbrance or disposition of title in the said assets will be
registered with the appropriate statutory bodies. 90 For example, mortgages over vessels are to
be registered with the Maritime and Port Authority of Singapore.91

Usually, any filings, lodgements or registrations regarding securities with the relevant
statutory body incur fairly nominal registration charges. The creation or enforcement of
certain securities also attract taxes such as stamp duties and withholding tax in some cases.92

Forms of security recognised under Singapore law

The following are the types of security acknowledged in Singapore:

i. Guarantees, including standby letters of credit and performance guarantees.

ii. Charges over assets including both fixed and floating charges.93
iii. Assignment of receivables.94

89
McCormack G, ‘Reforming the law of security interests: National and international perspectives,’ Singapore
Journal of Legal Studies, 2003. -https://www.jstor.org/stable/24868193?seq=9
90
Yen T, Tay J, ‘The securitisation law review: Singapore,’ The Law Reviews, 8 November 2021, -<
https://thelawreviews.co.uk/title/the-securitisation-law-review/singapore#footnote-006-backlink>-
91
The Merchant Shipping (Registration of Ships, Sales and Mortgage), Laws of 1963 to 2005.

92
Yen T, Tay J, ‘The securitisation law review: Singapore,’ The Law Reviews, 8 November 2021, -<
https://thelawreviews.co.uk/title/the-securitisation-law-review/singapore#footnote-006-backlink>-
93
Section 131, Companies Act, (2006).
94
Public finance ltd bhd v Scotch leasing sdn bhd, Federal Court of Malaysia, (1996).

29
 iv. Security over real assets such as mortgages and pledges.95

Real security over chattel mortgages

Under Singapore law, movable property can be classified as either tangible or intangible.
This is also the situation in Kenyan law as per Section 2 of the MPSR Act. 96 Therefore, some
of the most common forms of tangible movable property in Singapore include plant and
machinery, stock and inventory as well as ships and aircrafts. On the other hand, guarantees
and choses in action are some of the examples of intangible movable property in this
jurisdiction.

In Singapore, chattel mortgage is created in the same way as mortgage over land. 97Traditional
mortgage over land involves transfer of ownership of land from the debtor to the creditor.
The same therefore applies in chattel mortgage. This transfer is subject to the debtor or third
party’s right to have ownership reverted to them upon repayment of the sum total owed. This
right is referred to as the equity of redemption. Ownership is passed to the creditor, but
possession remains with the debtor. Right to sell the property as well as the right to
foreclosure in the event of failure to pay sum owed are some of the remedies available to the
creditor.98

Legal framework on chattel mortgages in Singapore

a) Written chattel mortgages created by individuals governed by the Bill of Sales Act.99

This Act regulates written chattel mortgages through strict registration and procedural
requirements. For instance, failure to comply with the registration requirement renders the
bill of sale void in respect of the security interest.100

b) Written chattel mortgages created by incorporated companies governed by the

Companies Act.101The Companies Act requires a chattel mortgage created by a company to
be put up for registration within 30 days after its formation. Non-compliance renders the

95

96
Section 2, Movable Property Security Rights Act, (2017).
97
Tan S, Ling Loo, ‘The law of credit and security,’ Singapore Law Watch, 11 July 2019.
98
ibid
99
Bill of Sale Act, (1886).
100
Section 4, Bill of Sale Act, (1886).
101
Companies Act, (1967).

30
security interest void against the liquidator and any other creditor upon the insolvency of the
company.102

Registration under the Act amounts to notice to the public of the existence of the security
interest.

c) Mortgages created over certain types of goods regulated by specific statute.

Mortgages over certain types of goods are regulated by specific statute as opposed to the
aforementioned statutes. For instance, mortgages of registered ships must comply with the
requirements of the Merchant Shipping Act Cap 179, 1996.103

Real security over choses-in-action

A chose in action is a right to personal things of which the owner has not the possession but
merely a right of action for their possession. 104 These are intangible personal assets which are
enforceable by legal action. They include assignment of receivables, bank deposits, rights
under insurance policies, stocks and shares as well as copyright.

Under Singapore law, securities over choses-in-action are created in the same way with
generally the same rights and obligations as mortgages over land and chattels. Therefore,
ownership in property is transferred from the debtor to the creditor and the transfer is subject
to the debtor or the third party’s right to have ownership reverted to them upon repayment of
the sum total owed.105

Legal framework

a) Common law and normal contractual principles apply generally to mortgages

and charges over choses-in action.106

Generally, common law and normal contractual principles apply to such mortgages and
charges. Particular statutory obligations operate according to the type of chose-in-action. For

102
Section 131, Companies Act, (1967).
103
Merchant Shipping Act, (1996).
104
Black’s Law Dictionary, 2ed.

105
Tan S, Ling Loo, ‘The law of credit and security,’ Singapore Law Watch, 11 July 2019.
106
Tan S, Ling Loo, ‘The law of credit and security,’ Singapore Law Watch, 11 July 2019.

31
example, mortgages or charges over scripless shares ought to observe with the procedure
prescribed by section 130N of the Companies Act.107

b) Mortgages and charges created over bank deposit accounts in favour of bank are
specifically authorised.

Section 13 of the Civil Law Act of Singapore permits the legal or equitable mortgages and
charges over existing customers’ bank deposit accounts created in favour of the bank as
security for advances to the existing customers.108

c) Mortgages and charges, where a mortgagor or chargor is a company, are

regulated by the Companies Act.

Where the mortgagor or charger of the chose-in-action is a company, the registration

requirements of the mortgage or charge and consequences for non-compliance under the
Companies Act may apply.109

Similarities between personal property securitisation in Singapore and Kenya

a) By virtue of both countries adhering to common law, credit and security law is mostly
based on English law. Therefore, traditional common law forms of interests such as
pledges, mortgages, lien and equitable charges are acknowledged and adopted in both
nations.
b) Both states possess a legal framework on personal property security rights which
provide for tangible and intangible movable property.

Differences between personal property securitisation in Singapore and Kenya

a) In Singapore there is a multiplicity of registers. These include the Companies Register

and the Bills of Sale Register.110 In Kenya, however, there is one registry to facilitate
the registration of all security rights in movable assets.111

107
Section 130N, Companies Act, (1967).
108
Section 13, Civil Law Act, (1909).
109
Section 131, Companies Act, (1967).

110
McCormack G, ‘Reforming the law of security interests: National and international perspectives,’ Singapore
Journal of Legal Studies, 2003, 9, -https://www.jstor.org/stable/24868193?seq=9 .
111
Section 3, Movable Property Security Rights Act,(2017).

32
 b) Securities over personal property and land in Singapore are created in the same
manner. They are formed with generally the same rights and obligations. However, in
Kenya, securities over personal property and land are created differently.

c) In Singapore, there are several statutes which govern securitisation of movable

property such as the Merchant Shipping Act Cap 179, 1996 and the Bill of Sales Act
whereas in Kenya it is only the Movable Property Security Rights Act of 2017 which
regulates the securitisation of movable property.

5: RECOMMENDATIONS (EVERYONE'S TASK)

6. CONCLUSION

33
It is progressive in that; it recognizes intangible assets like intellectual property (IP) and
receivables as collateral/. It also enables both legal persons and natural persons to create
securities over moveable property. Furthermore, it provides a simpler way of creating
securities over moveable property. Finally, it allows for other options of recovering debts
other than the Court process.

(A BRIEF SUMMARY OF DEVELOPMENT OF MPSR ON SMEs)

(TO BE REVISITED ON 7TH TO IDENTIFY RELEVANCE)

A taskforce paper called ‘Strategy for Small Scale and Jua Kali Enterprise Development in
Kenya’ came to be. It was the foundation through which the policy framework for Sessional
Paper No. 2 of 1992 on Small Enterprises and Jua Kali Development was created. This
sessional paper defined SMEs as enterprises that employ between 1 & 50 employees.

34
The next paper on SMEs was Sessional Paper No. 2 of 2005 on Development of Micro and
Small Enterprises for Wealth and Employment Creation for Poverty Reduction. It highlighted
what held back SMEs from growing, some of these factors being access to information,
access to financial services, access to skills and technology among other constraints. It
proposed how these issues could be resolved, including a proposal for A Small Business Act
which became the Micro and Small Enterprise Act being passed in Parliament in 2012.

35