Kenyans are set to benefit from a new law that will allow Savings and Credit Co-operative Societies (Saccos) to use household goods, livestock and office equipment as security to access loans.
The move is being discussed by the Business Registration Service (BRS) who are in talks with Saccos to include movable assets as loan security.
This will see Saccos join banks in expanding their loan securities as part of the Movable Property Security Rights Act 2017 that enabled banks to expand their collateral.
Most Kenyans were locked out of credit services before the law was passed as many did not own immovable assets such as land and buildings.
Business Registration Service Director General Kenneth Gathuma confirmed the talks with Saccos to adopt the law.
"We have an engagement to sensitise and give them awareness on what needs to be done to come into this lending ecosystem," Gathuma told Business Daily.
He added that the societies will act as creditors in order to register security rights of the assets issued by either members or the guarantors.
The move is bound to see an increase in interests in competing claims in case of default in repayment of loans.
Saccos currently use guarantors to offer credit to its members and in case of a default, the deposit amount guaranteed by the guarantor is used to service the loan.
Sacco Societies Regulatory Authority (Sasra) Chief Executive John Mwaka noted that Saccos will amend their own laws for operationalization as opposed to the industry's regulations.
"The decision will be on members to ratify their own regulations during annual general meetings and accommodate the changes in their business procedures," explained Mwaka.
Sacco members who wish to use the law will be required to register the assets as collaterals at the government online platform on eCitizen, under business registration service.
In the 2017 regulations, a borrower can access credit from multiple lenders with the same asset, but only the first lender who registered the security right will have priority in case of a default.
