Nairobi — The government is seeking to review laws related to security rights over movable property through the introduction of the Movable Property Security Rights (Amendment) Bill, 2024.
The Bill, which is currently under review by the Finance parliamentary committee, is pushing for various changes into the Movable Property Security Rights Act (MPSR), 2017 to streamline regulations stipulated in the Act.
The current MPSR Act, introduced in 2017, aimed to streamline the use of movable assets as collateral but has faced criticism for its overlap with other regulations, including the Companies Act and the Hire Purchase Act.
Sammy Ndolo Managing Partner Cliffe Dekker Hofmeyr (CDH) Kenya law firm asserted that the Movable Property Security Rights Act 2017 is burdensome and outdated for businesses.
"This new legislation is all about updating and unifying existing rules, impacting the Movable Property Security Rights Act, Cap 499A Laws of Kenya (MPSRA) and the Companies Act, Cap 486 Laws of Kenya (Companies Act). At its core, this Bill proposes to repeal the archaic Hire Purchase Act, Cap 507 Laws of Kenya (Hire Purchase Act)," said Ndolo.
"If passed, this Bill will be a major step forward in regulating movable property transactions and hire purchase businesses," he added.
Among the proposed changes are the Central Bank of Kenya's (CBK's) setting interest rates for hire purchase agreements, in what could complicate and potentially reduce the attractiveness of hire purchase deals.
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The Bill also seeks to expand the definition of a hire purchase agreement to include transactions where the purchase price is financed by the seller or a third party.
"Under the Bill, all entities involved in hire purchase must be licensed, which could streamline regulations but may also increase bureaucratic hurdles for some businesses and expand the regulation of lending business," Ndolo explained.
"While the Bill aims to simplify the licensing process, it may also lead to increased administrative work, and excluding financial institutions already licensed by the Central Bank of Kenya (CBK) could ease this burden."
The Bill further proposes that CBK set interest rates for hire purchase agreements; however, it did not specify whether the CBK will set specific rates or merely monitor them.
Ndolo expressed concern that this could complicate and potentially reduce the attractiveness of hire-purchase deals.
If the Bill is approved, it will alter the procedures for handling the repossession of goods supplied under hire purchase agreements.
It will also enable debtors to ask for the revocation of security registration notices if the security right is no longer valid.
"If approved, this Bill will mark a significant shift in how movable property transactions are regulated in Kenya, potentially bringing both new opportunities and challenges for businesses," Ndolo stated.
