Movable Assets Registry Unlocks Finance for SMEs
An innovative new scheme introduced by the Kenya Business Registration Service is helping entrepreneurs in the informal sector access much-needed finance by recognizing non-traditional assets as collateral for loans.
In 2017, the government enacted the Movable Property Security Rights (MPSR) Act to enable the registration of security rights of movable properties through an electronic system. The Moveable Assets Registry promotes lending and enables small business owners to use movable property as collateral to access credit from banks, microfinance institutions (MFIs), and credit unions. Many of these entrepreneurs do not own property or land and would otherwise be unable to access loans through traditional banking channels. For example, a smallholder farmer can use their livestock as loan collateral, simply by logging their details onto the Business Registry Platform. Once they apply for a loan, the lender puts a charge lien against those assets in the register, so they can’t be used as collateral for other finance applications.
The system is expected to continues being a game-changer for small businesses and could unlock a lot of potential for green finance, particularly in Kenya’s agricultural sector. Currently, three of Kenya’s major banks are active on the platform, alongside many more MFIs and credit unions.
Kenya Bankers’ Association (KBA) is engaging with the financial sector to bring more mainstream banks to the platform, while also reaching out to SMEs to increase awareness. KBA routinely offers training, mentorship, and networking opportunities for small and micro business owners, and in 2020 it launched an online marketplace where SMEs can interact with each other and market their products and services.
Since the registry's operationalization, items such as household items, motor vehicles, furniture, machinery, and livestock have been used as collateral. Compared with the data in 2019, the number of registrations for these items has doubled in 2021. For example, the number of household items has increased from 198,873 in 2019 to 427,429 in 2021, and the number of motor vehicles has increased from 86,010 to 206,069.
The statistics show that movable assets have been effective for Micro, Small, and Medium-sized enterprises (MSMEs) and women-led organizations. In 2020, the number of micro-enterprises was (5,252), Small (5,127), medium (2,601), women-led organizations (2,289), and large lenders (984).
Accessing finance is a traditional barrier for small businesses all over the world and KBA believes the Moveable Assets Register can be replicated in other emerging markets to give entrepreneurs the cash injection they need to scale up.
Key Links/Documents:
https://brs.go.ke/the-collateral-registry/
https://brs.go.ke/wp-content/uploads/2024/07/MPSR-User-Guide.pdf