316 Upper Hill Chambers, 17th Floor

2nd Ngong Avenue

/ [email protected]
 A
Handbook
on the
Movable Property Security Rights Act

Business Registration Service

Page 1
© Business Registration Service 2020

Published by:
Business Registration Service
316 Upper Hill Chambers, 17th Floor
2nd Ngong Avenue
P. O. Box 30031 - 00100
Nairobi, Kenya
Email: [email protected] / [email protected]

Page 2
 ACKNOWLEDGEMENTS

We wish to thank all those who made the preparation of this Handbook possible.

Special thanks are due to the consultants, Wanyaga & Njaramba Advocates, and the entire team led by Dr Njaramba
Gichuki, assisted by Rebecca Wanyama, for the preparation of this Handbook and for the effort and time they put
in the Capacity Building and Public Awareness on the Movable Property Security Rights Act, 2017 Project.

We are grateful to the World Bank, through the Financial Sector Support Project, for the support and making the
Capacity Building and Public Awareness on the Movable Property Security Rights Act, 2017 Project possible.

Kenneth Gathuma
Director General
Business Registration Service

Page 3
 TABLE OF CONTENTS

ACKNOWLEDGEMENTS....................................................................................................................................................................................................3
CHAPTER ONE: BACKGOUND......................................................................................................................................................................................7
1.1 Introduction.............................................................................................................................................................................................................................7
1.2 Background..............................................................................................................................................................................................................................7
1.3 Challenges of the Previous Regime..........................................................................................................................................................................7
1.4 Handbook Rationale and Objectives......................................................................................................................................................................9

CHAPTER TWO: OVERVIEW OF THE ACT...............................................................................................................................................................11

1.1 Rationale/Justification....................................................................................................................................................................................................11
1.2 Objectives.................................................................................................................................................................................................................................11
1.3 Scope of the Act..................................................................................................................................................................................................................12
1.4 Exceptions to Application............................................................................................................................................................................................14
1.5 Creation of a Security Right.........................................................................................................................................................................................15
1.6 Security Agreement..........................................................................................................................................................................................................15
1.7 Cross-Collateralisation of Debts...............................................................................................................................................................................15
1.8 Registration of Notices...................................................................................................................................................................................................16
1.9 Initial Notice..........................................................................................................................................................................................................................16

Page 4
1.10 Amendment Notice..........................................................................................................................................................................................................17
1.11 Cancellation Notice...........................................................................................................................................................................................................17
1.12 Authorisation to Register.............................................................................................................................................................................................18
1.13 Third-Party Effectiveness.............................................................................................................................................................................................18
1.14 Priority.......................................................................................................................................................................................................................................19
1.15 Enforcement of a Security Right..............................................................................................................................................................................19
1.16 Applicable Laws..................................................................................................................................................................................................................21
1.17 General/Transitional Provisions...............................................................................................................................................................................22
1.18 The Movable Property Security Rights Regulations, 2017......................................................................................................................24

CHAPTER THREE: INSTITUTIONAL FRAMEWORK & RESPONSIBILITY MATRIX...........................................................................26

1.1 The Business Registration Services (BRS).........................................................................................................................................................26
1.2 Registrar of Collaterals..................................................................................................................................................................................................26
1.3 The Movable Property Security Rights (MPSR) Registry.........................................................................................................................27
1.4 How to Use the MPSR Registry.................................................................................................................................................................................29
1.5 Secured Creditors..............................................................................................................................................................................................................33
1.6 Grantor......................................................................................................................................................................................................................................33
1.7 Borrower..................................................................................................................................................................................................................................34

Page 5
CHAPTER FOUR: STATISTICS & MILESTONES UNDER THE NEW REGIME.......................................................................................36
1.1 Registrations versus Searches...................................................................................................................................................................................36
1.2 Statistical Development.................................................................................................................................................................................................41
1.3 Achievements.......................................................................................................................................................................................................................42
1.4 Challenges...............................................................................................................................................................................................................................43

CHAPTER FIVE: PRODUCT DEVELOPMENT AND MARKETING..............................................................................................................46

1.1 Definition and Objectives.............................................................................................................................................................................................46
1.2 Benefits of Diversifying/Widening Available Products.............................................................................................................................46
1.3 Focusing on Capitalisation of Micro & Small Enterprises (MSEs).......................................................................................................46
1.4 Important Issues to Consider.....................................................................................................................................................................................47

FEES SCHEDULE.................................................................................................................................................................................................................49
MPSR USER MANUAL......................................................................................................................................................................................................47
1.1 Purpose......................................................................................................................................................................................................................................51
1.2 Collateral Registry- Initial Registration process.............................................................................................................................................51
1.3 Search Request....................................................................................................................................................................................................................66
1.4 Transferring Ownership of an Application.........................................................................................................................................................71

Page 6
CHAPTER ONE: BACKGOUND

1.1 Introduction

This Chapter details the background to the development of the movable collateral regime in Kenya and the
roadmap to the new regime, in particular, the enactment of the Movable Property Security Rights Act (MPSR),
2017, the Movable Property Security Rights Regulations, 2017, and the creation of the Movable Property Security
Rights e-Registry. It also highlights the rationale for developing this handbook.

1.2 Background

The Movable Property Security Rights Act (MPSR), 2017 is the most significant statute to impact the use of movable
security in Kenya. It came into force on 16th May, 2017, with the Movable Security Rights (General) Regulations,
2017 coming into force on 2nd June, 2017. The Act is part of a number of laws that the Government has, and intends
to enact as part of Kenya Vision 2030’s objective of developing an efficient and globally competitive financial
services sector.

In the past, the main statutes governing use of movable property as collateral for credit were the Chattels Transfer
Act, the Pawnbrokers Act, the Agriculture Act, the Stamp Duty Act, the Hire Purchase Act, the Business Registration
Services Act, the Companies Act, the Insolvency Act, the Law of Contract Act, the Banking Act, the Auctioneers Act,
the Registration of Documents Act and the Traffic Act. This regime was problematic and full of challenges.

1.3 Challenges of the Previous Regime

First, the regime and provisions were remarkably outdated and meaningless in the 21st century, particularly
for harnessing the value of many assets, private or commercial, for capital and commercial purposes. It was
therefore insufficient for modern credit and digital economy.

a) Multiplicity of laws was also an issue as evidenced by the large number of statutes that governed movable
property lending in Kenya as indicated above.

Page 7
 b) There existed an extremely weak and disorganised legal framework for use of personal property as security
for credit. There was no clear scope or definition of such assets.
c) Even without a clear definition, the scope of personal property was seriously limited and did not envision
use of assets such as intellectual property, livestock, and crops among many others.
d) The enforcement mechanisms were weak, lengthy, costly, and substantially limited. Lenders had to undergo
lengthy court procedures to recover in case of default.
e) Weak, dispersed and multiple registry system that were provided for under the numerous different statutes
that governed the regime. This created difficulty in establishing credit histories and creation of priority
rights especially because the registries were physical and manual.
f) Delays resulting from the outdated physical manual registry were the order of the day. Lenders had to
manually deliver security agreements to the registry. Searching the records was also a time-consuming
process.
g) Weak and compromised priority rights. This was as a result of the multiplicity of the registry system as well
as the lack of a clear formula of establishing priority.
h) Emergent forms of personal property, such as intellectual property, were not envisioned as capable of
securing credit. This greatly hindered innovation.
i) Unnecessary risks to the lender as a result of having to jointly own movable assets with the borrower in a
bid to guarantee security.
j) High cost of borrowing due to statutory charges such as stamp duty, as well as expensive enforcement
procedures.
k) There was significant financial exclusion of part of the population that did not own immovable assets –
mostly MSEs and low-income individuals.
l) There were no clear provisions for conflict of laws in the event of cross-border lending or situation of movable
assets.

Page 8
These deficiencies necessitated the enactment of a new law as a corrective measure.

Consequently, the Office of the Attorney General in collaboration with the National Treasury came up with the
initiative to create a law that took into consideration of various movable assets that could be used as security.
This was in a bid to promote financial inclusion and deepening for Micro and Small Enterprises (MSEs), and the
general public.

The result was the Movable Property Security Rights Act, 2017, the Movable Property Security Rights Regulations,
2017 and the Collateral e-Registry.

1.4 Handbook Rationale and Objectives

The rationale for the preparation of this handbook is to inform various stakeholders including policymakers,
financial institutions, lawyers, judges and magistrates, informal lenders, leasing, hire-purchase, and credit trading
companies, and potential borrowers on the opportunities created on the new types of collateral that is acceptable
for them to access credit for their businesses.

This is a relatively new Act and hence the need to create awareness to all key players – both state and private sector
actors.

Page 9
 Mali poa, hali poa!

Jipange!
Tumia vifaa vyako vya biz kama ahadi ya mkopo
Credit runs lives & business hence lending and borrowing should be
seamless and easy.
Now everyone can get back to the business they do best, as we keep
the wheels of commerce turning and ultimately drive Kenya’s ease
of doing business.
MPSR a government e-collateral registry, anchored on the Moveable
Property Security Rights Act, 2017. The MPSR Act, 2017 promotes lending
using movable property as collateral with an aim of promoting financial
inclusion and access to credit.
Log on to www.brs.go.ke. for details and access to the Registry.
Page 10 A SERVICE BY THE BUSINESS REGISTRATION SERVICE
CHAPTER TWO: OVERVIEW OF THE ACT

This chapter focuses on the Movable Property Security Rights Act and regulations and highlights on the different
notices for registration and how security rights are created and enforced.

1.1 Rationale/Justification

The Act mainly seeks to improve the ease of doing business in Kenya by enabling instant, remote and efficient
registration of security rights of movable properties through an electronic platform. It has provided for the
promotion of access to credit for MSMES, low-income earners, and other owners of movable assets. The MPSR
also seeks to consolidate and strengthen the registry system.

1.2 Objectives

The objectives for the MSPR Act are as follows;

i. To provide for the use of movable property as collateral for credit facilities.

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

iii. To establish an electronic collateral registry to facilitate the registration of notices relating to 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.

Page 11
1.3 Scope of the Act

The MPSR Act governs secured transactions between a borrower and a lender where in return for a loan advanced,
the borrower gives movable property as security or collateral. This law has diversified the type of collateral that
constitutes security. It applies to security rights in movable assets including;

a) Every transaction that secures payment or performance of an obligation,

b) Chattel mortgage,

c) Credit purchase transaction,

d) Credit sale agreement,

e) Floating and fixed charge,

f) Pledge,

g) Trust indenture,

h) trust receipt and

i) Financial lease.

Movable assets are categorised 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.

Page 12
1.1.1 Types of Movable Collateral

Tv
Living room

Bedroom

Drone Motor vehicles Dining room

Page 13
The Act enables borrowers to make use of their personal property as collateral for credit. These may include both
tangible and intangible assets. They may use one collateral as security against multiple credit facilities. For the
lender, it creates an environment where they are more secure in lending credit to a class of people they would
not normally lend to, and accept as security collateral they would not traditionally accept as such. The Act not only
gives provisions to protect the lender in event of default, but it also establishes a collateral registry, which acts as
a public notice to any other entity interested in the collateral, that there is a prior interest and should they choose
to lend against the same collateral, they will become second or third in priority in event of default.

1.4 Exceptions to Application

The MPSR Act does not apply to;

a) Security rights in proceeds of collateral if the proceeds constitute a type of asset that is governed by another
law.

b) A security right in book-entry securities under the Central Depositories Act, 2000.

c) The creation, lease or transfer of an interest in land, excluding a right to payment that arises in connection
with an interest in or a lease of land.
d) A security right in a vessel including a mortgage right subject to the Merchant Shipping Act, 2009.

e) A security right in an aircraft subject to the Civil Aviation Act, 2013.

f) Except as otherwise provided by the Act, a lien, charge or other interest created by law.

Page 14
1.5 Creation of a Security Right

A security right is a property right in a moveable asset that is created by an agreement to secure payment or
performance of an obligation.
It is created by a security agreement between the grantor and the secured creditor, provided that the grantor has
rights in the asset to be encumbered or the power to encumber it.

1.6 Security Agreement

A security agreement must;

 Be in writing and signed by the grantor,

 Identify the secured creditor and grantor,

 Describe the secured obligation (except in the case of an agreement that provides for the outright transfer
of a receivable)

 Describe the secured obligation.

 A description is sufficient if it identifies the collateral by specific listing, category, type of collateral defined
in the act.

1.7 Cross-Collateralisation of Debts

A collateral may secure multiple and separate debts that may be owed to the secured creditor. For instance, a
security right may be created over a tractor to secure the repayment of a loan, but the same tractor could secure
an already existing credit obligation of the grantor or other previously unsecured facility.

Page 15
1.8 Registration of Notices

There are three kind of notices that may be registered in the MPSR Registry, including: -

i. An initial notice,
ii. An amendment notice and
iii. A cancellation notice

1.9 Initial Notice

The initial notice must be in English and it should include the following: -

a) The identifier and address of the grantor.

b) The identifier and address of the secured creditor

c) A description of the collateral

d) Period of effectiveness of the security right and

e) Any other information for statistical purposes.

Upon registration: -

a) The Registrar enters the information on the notice into the Registry records.
b) The registrant receives a printable copy of the information contained in the notice, including time of
registration and registration number. The secured creditor must send the information contained in the
notice to the grantor within ten days of receipt once the notice is registered.

Page 16
 c) An initial notice is effective for the specified period but shall not exceed ten years. Extension beyond 10
years may only be sought within six months prior to expiry.
d) An error in the grantor identifier such as the ID number or in the description of the collateral renders the
notice ineffective.

1.10 Amendment Notice

This is registered by the secured creditor if the initial notice contains information outside the grantor’s scope of
authorisation, or if the security agreement is revised to delete some collateral and there is a change in the grantor
identifier after registration of the initial notice. This change should be done within sixty days to avoid loss of priority.

It is also done when the collateral has been transferred to a new owner provided the owner is acquiring the
asset together with the obligations of the security right. This is to be done within 10 working days upon acquiring
knowledge of the transfer and transferee’s identifier.

1.11 Cancellation Notice

This is registered by a secured creditor: -

a) On termination of a security right in the collateral.

b) If the initial notice was not authorised by the grantor;

c) If the authorisation has been withdrawn and no security agreement has been concluded; or

d) If the security right to which the notice relates has been extinguished and the secured creditor has no
further commitment to provide value to the grantor.

Page 17
1.12 Authorisation to Register

A grantor must authorise the registration of a notice in the MPSR Registry.

Typically, there are two forms of authorisation:

i. signature on the security agreement

ii. separate authorisation in writing commonly provided in anticipation of executing a security agreement.

Oral or voicemail authorisations are not recognised.

For certain amendments, such as adding new collateral not previously listed in a security agreement or a new
grantor, additional authorisation is required.
For other amendments, such as change of address or name of the secured creditor, or grantor, no authorisation
is needed.
In order to prevent the risk of third parties fraudulently amending or cancelling registrations, only the secured
creditor is authorised to amend or cancel its registration.

1.13 Third-Party Effectiveness

Registration of an initial notice perfects the security right, creating third party effectiveness.
Where a security right in a collateral is effective against third parties, then such effectiveness will extend to the
proceeds of such collateral.
Certain proceeds including; money, receivables, negotiable instruments and/or rights to payment of funds credited
to a deposit account, acquire third-party effectiveness without any further action of the grantor or the secured
creditor.
In case of all other proceeds, third-party effectiveness continues for a period of ten days within which the secured
creditor needs to register an amendment.

Page 18
1.14 Priority

Priority among competing security rights may be created by the same grantor in the same collateral and it is
determined according to the time of registration of the initial notice. Knowledge of the existence of a security
right in favour of another person on the part of a secured creditor does not affect its priority.
A security right created by a grantor is subordinate to a security right in the same collateral created by another
person if the grantor acquired the collateral subject to the security right created and made effective against third
parties by the other person before the grantor acquired it.
Non-consensual creditor has a priority over the security right only if he had registered a notice with the Registrar
before the security right was made effective against third parties.
An acquisition security right is a security right in an asset securing an obligation to pay any unpaid portion of the
purchase price to enable the grantor to acquire it. It has priority over a competing non-acquisition security right
provided a notice thereof is registered before the grantor obtains possession of the asset.
A possessory lien on goods has priority over a security right as long as the holder of the possessory lien remains in
possession of the goods.
A buyer or other transferee of the collateral such as lessee or licensee acquires its rights free of the security right if
the secured creditor authorises the sale or transfer.
The rule of the innocent purchaser without notice applies to an ordinary buyer or lessee provided that he did not
have knowledge that the sale or lease violates the rights of a secured creditor.

1.15 Enforcement of a Security Right

A secured creditor may exercise their post-default rights by: -

 an application to a court of law or;

 exercising his/her rights under the security agreement, without applying to a court.

Page 19
The secured creditor may;

a) sue the grantor for any payment due and owing under the agreement

b) appoint a receiver of the movable asset (holder of qualifying floating charge)

c) lease the movable asset

d) take possession of the movable asset

e) sell the movable asset

Any person whose rights are affected by the enforcement process is entitled to redeem the collateral by repaying
or performing the secured obligation in full.

If the secured creditor wants to dispose the collateral he must send a notification to the grantor, debtor and any
other secured creditor that has registered a notice with respect to the collateral within at least five working days
before notification is sent to the grantor.

A secured creditor may sue the grantor for performance of the obligations only if;

a) The grantor is personally bound to satisfy the secured obligation.

b) The collateral is insufficient to fully satisfy the secured obligation.

c) The secured creditor is deprived of the whole or part of the security right through a wrongful act or default
of the grantor or a debtor.

Page 20
1.16 Applicable Laws

A grantor and secured creditor may, in their security agreement, choose the law applicable to their mutual rights
and obligations. However, in the absence of a choice of law, the law governing the security agreement shall apply.
The law applicable to the creation, effectiveness against third parties and priority of a security right in a tangible
asset is the law of the country in which the asset is located. However, if the tangible asset is one that is ordinarily
used in more than one country, then the applicable law shall be the law of the country in which the grantor is
located.

In the case of intangible assets, the law applicable to the creation, third-party effectiveness, and priority of a
security right is the law of the country in which the grantor is located.

The law applicable to the creation, effectiveness against third parties and priority of a security right in intellectual
property is the law of the country in which the intellectual property is protected.

The law applicable to the creation, third-party effectiveness, priority and enforcement of a security right in a right
to payment of funds credited to a deposit account, as well as to the rights and obligations between the financial
institution and the secured creditor, is the law of the country in which that financial institution has its place of
business. If the financial institution has places of business in more than one country, the law applicable is the law
of the country in which the branch maintaining the deposit account is located.

The law applicable to the creation of a security right in proceeds is the law applicable to the creation of the
security right in the original collateral from which the proceeds arose.

The law applicable to the third-party effectiveness and priority of a security right in proceeds is the law applicable
to the third-party effectiveness and priority of a security right in the original collateral of the same kind as the
proceeds.

Page 21
1.17 General/Transitional Provisions

This Act applies to all security rights within its scope, including security rights created prior to its enactment.
In case of a matter that was already the subject of proceedings before a court or arbitral tribunal prior to the
coming into force of this Act, then the previous legal regime shall apply.
A security right created prior to the commencement of this Act remains effective between the parties despite the
fact that its creation did not comply with the creation requirements of this Act.
A security right that was effective against third parties under prior law continues to be so under this Act until;
either it ceases to be effective against third parties under the prior law, or, the expiration of nine months after the
coming into force of this Act, whichever is earlier.
A written agreement between the grantor and the secured creditor creating a security right and entered into
before the coming into force of this Act is sufficient to constitute authorisation by the grantor for the registration
of a notice relating to that security right after the coming into force of this Act.

Page 22
This Act has amended a number of laws as set out below: -
LAW AMENDMENT
Chattels Transfer Act (Cap. 28) Repealed
The Pawnbrokers Act (Cap. 529) Repealed
Hire Purchase Act (Cap. 507) Amended to remove the requirement to register hire purchase
agreements. The office of the Registrar of Hire Purchase Agreements, and
to include the requirement to register notices with respect to security
rights created under the Hire Purchase Act in the MPSR Registry, as well
as other minor amendments to align terminologies with the MPSR Act.
Companies Act, No. 17 of 2015 Amended to include requirement to register debentures at the electronic
MPSR Registry, as well as other minor amendments to align terminologies
with the MPSR Act.
Insolvency Act, No. 18 of 2015 Amended to include the fact that the priority of competing floating
charges shall be determined in accordance with the MPSR Act, as well
as other minor amendments to align terminologies with the MPSR Act.
Stamp Duty Act (Cap. 480) Amended to remove the requirement to stamp security agreements
under the MPSR Act, as well as other minor amendments to align
terminologies with the MPSR Act.
Agricultural Finance Corporation Amended to make security rights on movable assets created under the
Act (Cap. 323) Act to be within the scope of the MPSR Act.
Business Registration Service Act Minor amendments to align terminologies with the MPSR Act.
(No. 15 of 2015)

Page 23
1.18 The Movable Property Security Rights Regulations, 2017

The Act empowers the Cabinet Secretary to make Regulations with respect to any matter under it to enable
enforcement of the provisions of the Act. To this end, the Cabinet Secretary formulated the MPSR Regulations,
2017, to help in the implementation of the Act.

They provide elaborate guidelines on how to use and operate the Electronic Collateral Registry.

They provide for the following matters;

 The conduct of the business of the Registry

 The format of notices to be registered in the Registry

 The payment of fees in respect of any matter under Part IV of the MPSR Act

 The provision of copies of any notices registered in the Registry and the certification of the copies on any
matter in relation to the Registry

Page 24
 Boresha maisha yako
na MPSR!

Kuwa smart

Tumia Mifugo yako kama ahadi ya mkopo

Lending to MSME’s can cause anxiety.
Now, it need not be with MPSR, a Business Registration Service (BRS) online
registry for registration of security rights in movable property.
Keeping the lifeblood of MSME’s flowing while securing the interest of a lender.
A win - win for both borrower and lender.
Log on to www.brs.go.ke. for details and access to the Registry.
A SERVICE BY THE BUSINESS REGISTRATION SERVICE

Page 25
CHAPTER THREE: INSTITUTIONAL FRAMEWORK & RESPONSIBILITY MATRIX

This Chapter focuses on the institutions under the MPSR Act as well as the rights and obligations of the various
key parties.

1.1 The Business Registration Services (BRS)

The BRS is a State Corporation established by an Act of Parliament under the Office of the Attorney General and
Department of Justice.

Its functions include;

a) Overseeing operations of the Companies, Insolvency (Official Receivers) and the Movable Property Security
Rights (Collateral Registry) registries. It carries out all registrations required under the BRS Act.
b) It maintains registers, data and records on registrations that it carries out.

c) It implements relevant policies and guidelines and provides the Attorney General with necessary information
to guide policy formulation and amendment.
d) Undertakes research and disseminates findings through seminars, workshops, publications or other media
and recommends to the Government any improvements in the relevant laws.
e) Collaborates with other state agencies for the effective discharge of its functions.
f) Charges fees for its services.
g) Such other functions as may be necessary under the BRS Act.

1.2 Registrar of Collaterals

The Act establishes the Office of the Registrar who is in charge of the operations of the collateral e-registry (MPSR).
The Registrar: -

Page 26
 a) Receives, stores and makes accessible to the public information on registered notices.
b) Does not, on own motion, amend or delete information contained in the Registry.
c) Preserves information contained in the registry records and reconstructs the information in the event of
loss or damage.
d) Only removes information in a registered notice from its public records only on expiry of period of
effectiveness of a notice.
e) Archives information removed from its public records for five years.
f) Cannot be held liable for anything done under the authority of the Act in good faith.

1.3 The Movable Property Security Rights (MPSR) Registry

The Act establishes an online Registry (MPSR) for the registration of all security rights in movable assets.
The MPSR Registry is hosted on the Government’s service single sign-on platform of e-Citizen and is administered
by the BRS.
It allows for remote access and registration of security rights.
Internet connection is required to access the MPSR Registry.
The MPSR Registry allows for instant and time-stamped registration of security rights.

It allows for functions such as;

i. Searches
ii. Registration of security rights
iii. Amendment of security rights
iv. Cancellation of security right

Page 27
It is designed to register notices i.e. simple forms rather than actual security agreements.
All persons with an e-citizen account may carry out a Search on the MPSR Registry. The other functions may only
be accessed and carried out by a secured lender.
In this respect, the powers of the Registrar are limited to ensuring that all the required information has been
entered into a notice.
The duty to scrutinise, verify, or certify the validity of the information in a notice lies with the secured creditor as
opposed to the Registrar.

Page 28
1.4 How to Use the MPSR Registry

Page 29
a) Accessing the MPSR Registry

Log in brs.go.ke

Select “online services” at top

right corner

Enter your,

e-citizen log in details

Select Collateral Registry

Page 30
b) The Search Process

Select the search requesr tab on the top right corner of the
screen.

Enter the details as prompted.

(Note:- Only the collateral or grantor’s identifiers are searchable)

Confirm details entered and submit application

Make payment of Kshs. 550/=.

Confirm payment.
Get printable search certificate.

Page 31
c) The Registration Process
Access
www.ecitizen.go.ke on your browser and
log in to your account.
Access Business.
registry Services.

Access the Application form by

clicking on the MPSR Registry. Select
the application from the list. Identify
this application and click on the blue
highlighted application form at the top
right corner.

Open and add the Grantor details.

Enter secured loan particulars.

Enter Collateral Details.

Add Creditor’s Details.

Review the application

View the Notice

Amend or Cancel notice.

Page 32
1.5 Secured Creditors

Secured creditors are not only those who provide credit in the form of loans of money. Anyone, including an
individual, business, or public entity, whether domestic or foreign, may be a secured creditor. For example, a
leasing company that leases machinery to a lessee, allowing him/her to acquire ownership to the object upon the
payment of all instalments, is also a secured creditor. In the same vein, credit may also be provided in the form
of a deferral of payment of the purchase price which enables the grantor to acquire a new asset. The MPSR Act
does not prevent multiple entities from acting as joint secured creditors.

A secured creditor has the following rights and obligations;

a) If in possession of the collateral, exercise reasonable care to preserve the asset;

b) Register the initial notice;

c) Register an amendment or cancellation notice on termination of a security right in the collateral;

d) Right to inspect the collateral in the possession of the grantor or another person;

e) Provide within a reasonable period of time adequate proof, upon request by a debtor, that the security
right in a receivable has been created;

f) Send copies of registered notices to the grantor and the borrower; and

g) Take all enforcement actions diligently and in good faith.

1.6 Grantor
A grantor is a person that creates a security right to secure either its own obligation or that of another person. A
grantor may also be a buyer or other transferee, lessee, or licensee of the collateral that acquires its rights subject
to a security right. Simply put, a grantor is a person whose movable asset is used as collateral for a security interest.

Page 33
The Act does not impose any limitations on who can provide assets as collateral and thus become a grantor.
Individuals, businesses, and public entities may encumber their assets to gain access to credit. Grantors may also
be domestic or foreign. A grantor need not necessarily be the person who receives the loan. For instance, a parent
company may obtain a loan using the assets of its subsidiary as collateral. A grantor;

a) Is required to authorise registration of a notice.

b) In possession of a collateral should exercise reasonable care to preserve the asset.
c) Act diligently and in good faith throughout the duration of a secured transaction.

d) Should give a timely notification to the secured creditor of any changes in identifier details or transfer of
collateral.

e) Has a right to compel an amendment or cancellation of a registered notice when some collateral has been
released (the registered notice must be amended to delete that collateral) or the loan fully paid off (the
registered notice must be cancelled).
f) Has a right to be notified, within 10 days, of registration of security interest notice.
g) Has a right to receive notification of public sale in case of commenced enforcement measures.

1.7 Borrower

A borrower is the person to whom a credit facility is extended to by a secured lender. It refers to the beneficiary of
the loan. The grantor may or may not be the borrower. The Borrower should exercise good faith in the repayment
of the loan.

Page 34
If it’s not a chicken
and egg story...You
can now get finance.

Kuwa smart!

Business can run on credit!

That is why the relationship between lenders and borrowers
should be simple. Now, financial institutions and other lenders
can give credit against all kinds of movable property, as we
keep the wheels of commerce turning.
MPSR is a Business Registration Service (BRS) online Registry
of security rights in movable property.
Log on to www.brs.go.ke.
for details and access to
the Registry.

A SERVICE BY THE BUSINESS REGISTRATION SERVICE Page 35

CHAPTER FOUR: STATISTICS & MILESTONES UNDER THE NEW REGIME

This Chapter gives a statistical analysis of the regime and highlights the milestones achieved under the MPSR Act.

1.1 Registrations versus Searches

As of November 2020, there were a total of 357,817 Notices of security rights registered in the E-Registry against a
total of 44,862 Searches done.

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. Statistics
show that the notices registered are usually more than the searches done each month (an average ratio of about
9:1 since the establishment of the e-registry).

It is important to conduct searches before registration of notices to ensure priority and perfection.

The ensuing tables and graphs show the number of notices registered vis-à-vis the searches done in each month
for the years 2017/2018, 2018/2019 and 2019/2020.

*Searches done were extremely low compared to the number of notices registered.

Page 36
a) July 2017 to June 2018

*The steep rise in notices was due to the requirement to transfer all records to the electronic register by February.

Page 37
b) July 2018 to June 2019

*The period still maintained the disparity between the number of notices registered vis-a-vis the searches conducted.

Page 38
 c) July 2019 to October 2020

Jan-
Jul Aug Sep Oct Nov Dec 2020 Feb Mar Apr May June July Aug Sep Oct Nov Totals
Notices 18785 12755 8902 9098 8969 6683 8584 8321 7844 3520 3590 4317 6945 6197 7768 7745 8450 138,473

Searches 1580 1074 1010 1166 1379 1097 1249 1096 1151 766 888 1547 1353 1094 1260 1904 1399 21,013

*The number of notices drastically went down in April 2020. This can be attributed to the COVID-19 pandemic.

*This trend continues in May and June 2020 which saw slow rise in registered notices. Interestingly, the number
of searches increased significantly in June.

Page 39
Page 40
1.2 Statistical Development

68% of respondents of a survey commissioned by the World Bank in 2019 felt that the registry was secure.
Although this is a good indication that users generally trust the system, there is an acknowledgement that
perceptions on security can be very subjective.
Respondents that questioned the security of the platform cited the need for assurance that there is sufficient
back up as well as the need for maker-checker functionality for institutions.
A FinAcess Survey by the CBK in 2019 highlighted that Kenya has made significant milestones in expanding
access to financial services and products to 82.9 percent in 2019 from 26.7 percent and 75.3 percent in 2006 and
2016 respectively.
CBK 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.
An increase from Kshs. 19.6 billion to Kshs. 43.5 billion worth of loans extended using movable securities underlines
the lenders’ comfort in accepting movable property as security.
This remarkable change has been as a result of the MPSR Registry which has been acting as a tracking device for
both the lenders and the borrowers to ascertain various claims on the assets forwarded as collateral.
The World Bank annual ratings saw Kenya rise in rank from 61 in 2018 to 56 in 2019 out of 190 economies in the
ease of doing business. Further, the World Bank’s Doing Business 2020 Report ranked Kenya at number 4 out of
190 economies in the ease of getting credit, with the score of getting credit being 95.0 in a score line of 0-100.
140
129 129
122
120
113
109
106
100
92

80
80

61
60 56

40
2020 2018 2016 2014 2012 2010

SOURCE: TRADINGECONOMICS.COM | WORLD BANK

Page 41
1.3 Achievements

The new regime has eased the way of doing business especially for MSMEs.

This significant growth has been attributed to: -

 The existence of a unitary secured transactions system under the new regime, which provides for the legal
rights of borrowers and lenders.
 The operation of the Collateral Registry which allows for online public searches and the registration,
modification and cancellation of security interests.
 Digitisation – the BRS has been at the fore front in embracing technology to improve access to credit. This is
through the operationalisation of the online collateral registry among other developments to ensure ease
of doing business for all its stakeholders. The number of searches done vis-à-vis the registrations done.

Kenya’s ease of doing business ranking has grown significantly since the Kenya improved significantly over the
years.

The new MPSR regime has also brought about the following achievements: -

a) It has been key in promoting financial inclusion. This has been achieved though widening the scope of
assets that can be used as collateral as well as widening the scope of possible secured lenders to include
informal lenders.
b) It is progressive and has significantly been an improvement on the previous regime.
c) Movable asset-based lending in Kenya has become very lucrative for the banks and customers with credit
reaching a larger customer base.
d) Financial institutions have an opportunity to create new products under the Act.

Page 42
 e) The Registry has brought certainty with regards to priority rights.
f) Access to the Registry has created a verifiable way of establishing ownership of secured collateral.
g) Lenders have easy access to the registry rendering credit analysis fast and more efficient.
h) The regime has introduced alternative ways of recovering debts other than the court process thereby
lowering the cost and time of enforcement.
i) The establishment of the collateral registry has shortened the time of registering a security, as it is accessible
remotely.
j) It recognises intangible assets such as intellectual property (IP) and receivables as possible collateral.
k) Exemption from Stamp Duty has significantly reduced transactional costs.
l) Registration of a security right is instant provided there is good internet connection. There are no delays in
registration as experienced before.
m) It has eliminated congestion at the BRS offices as the collateral registry is accessible remotely.
n) It has significantly minimized paper work and cleared the confusion brought by the multiplicity of laws
under the previous regime.

1.4 Challenges

i. Competition from digital lenders issuing unsecured loans. Fintech lenders have created big competition
with would-be customers of lenders giving credit against movable collateral.
ii. Instances of double registration such as debentures at the Companies Registry and Motor Vehicles at the
NTSA have proved to be cumbersome.
iii. Cost – the search fee of Kshs. 500/= and a further search fee of Kshs. 500/= for vehicles at National Transport
and Safety Authority (NTSA) are almost unsustainable to the secured lenders. Consequently, most of

Page 43
 them have elected to proceed with registration of notices without conducting a search first. This may
consequently jeopardise their priority. The search fees are crucial in the maintenance and sustenance of
the MPSR Registry operations.
iv. Lack of a standard way of description of most movable assets poses a hurdle. Different lenders may describe
the same asset differently thereby creating confusion.
v. Taking up Intellectual Property as collateral remains a challenge due to the legislative gaps. The IP Laws do
not envisage creation of charges over IP thereby creating an enforcement problem.

Financial exclusion remains to be a major challenge to many Kenyans. A major factor that has hindered financial
deepening is the exorbitant and prohibitive cost of credit. The lack of affordable credit has left borrowers, majorly
MSEs and low income individuals, vulnerable to predatory lenders such as digital lenders that levy high interest
rates and impose brutish conditions that end up shackling borrowers to a vicious cycle of indebtedness and
helplessness. We remain hopeful that this regime will play a significant role in transforming market dynamics and
thereby foster financial inclusion.

Page 44
A thriving business
stall with plans to open
another? You can now
get finance.

Kuwa smart!

Business can run on credit!

That is why the relationship between lenders and borrowers
should be simple. Now, financial institutions and other lenders
can give credit against all kinds of movable property, as we
keep the wheels of commerce turning.
MPSR is a Business Registration Service (BRS) online Registry
of security rights in movable property.
Log on to www.brs.go.ke.
for details and access to
the Registry.

A SERVICE BY THE BUSINESS REGISTRATION SERVICE

Page 45
CHAPTER FIVE: PRODUCT DEVELOPMENT AND MARKETING

This Chapter focuses on the benefits and challenges of the MPSR Act for financial institutions and highlights the
emerging issues.

1.1 Definition and Objectives

A product loosely refers to a certain banking service that a commercial bank extends to the market, to cater for a
given need. Product development has been noted to have the following objectives: -

a) Growth of institution and customer business

b) Increase customer base.

c) Create competitive edge in the industry.

d) Hedge against calculated risk.

1.2 Benefits of Diversifying/Widening Available Products

The benefits of diversifying and widening products available to borrowers grows business for both the customer
and the institution. It increases lending to MSMEs particularly with the uncapping of interest rates. It also widens
the customer base particularly to the youth, women and other income groups who lack traditional collateral.

1.3 Focusing on Capitalisation of Micro & Small Enterprises (MSEs)

MSEs, particularly in Kenya, drive the economy as the sector creates many jobs and opportunities.
They create lucrative business for the banks as they are not very price sensitive, and uncapping of interest rate
gives room to renewed/increased lending to them.

Page 46
Special attention should be given to risk indicators, i.e. likelihood of default compared to the estimated profit,
however, because of numbers of borrowers’ bank’s risk factor is mitigated.
Hedging against risk is to a large extent related to the collateral offered.

1.4 Important Issues to Consider

Several lenders can be duped into lending against one/same collateral creating havoc at the time of recovery.
Movable collateral can be sold to unsuspecting parties creating loss to either the lender or the purchaser or both.
While the security right automatically extends to proceeds, at times, the proceeds may cease to be identifiable
and traceable, which could negatively affect the security right.
Instead of relying on this automatic extension, the secured creditor could include adequate collateral descriptions
in the security agreement. For instance, if the collateral is inventory it is likely to generate money, receivables, and
bank accounts.
The secured creditor may wish to identify these assets specifically as its collateral in a security agreement, in
which case it would no longer need to rely on the automatic extension of its security right in inventory to money,
receivables, and bank accounts.
Partnerships with institutions with shared agenda of meeting specific needs e.g. USAID which gives banks up to
50% backup on specialised equipment, solar tractors.
While taking advantage of the MPSR Act and the Collateral Registry, financial institutions need to develop new
products that will expand;

 Their customer base

 Spread out risk

 Grow both the customer and Bank’s business

Page 47
The need for new additional products development is enhanced by the streamlining of the services by MPSR Act
and creation of Central Collateral Registry with the following advantages:

a) Reduction in the cost of credit due to simplified process.

b) Actionable enforcement mechanisms.

c) Change from manual registry to include digital collateral registry in line with the changing times.

d) Untapped potential customers.

e) Beneficiaries of TVET getting into MSMEs needing equipment e.g. salons, garages.

Customers requiring machines and vehicles to meet emerging demands of Counties.

Financial institutions that will be the first to take advantage of the Act and Registry will reap the greatest benefits
as others follow. Two key principles remain supreme: -

 know your customer

 dual ethical practices both for the Bank and the Customer.

Page 48
FEES SCHEDULE

Service Offered Fees Document Document Issued Time

Lodged
Search request K s h s . Application Search Certificate Immediately
500/= made online
Initial Search Nil/Free Application Notice to Registrant of the Immediately
made online Initial Notice.
Amendment Notice Nil/Free Application Notice to Registrant of an Immediately
made online Amendment Notice.
Grantor’s request Nil/Free Application Notice to Secured Creditor Immediately
for registration made online of Grantor’s request
of Amendment or for Amendment or
Cancellation Notice Cancellation.
Cancellation Notice Nil/Free A p p l i c a t i o n Notice to Registrant of Immediately
made online Cancellation Notice.

Page 49
MPSR USER MANUAL

User Manual

Version 2.0
December 22, 2020

Prepared by
eCitizen

Prepared for
Government Digital Payment Systems
Movable Property e-Registry

Collateral Registry- Initial Registration

Page 50
1.1 Purpose

The purpose of this document is to provide a Visual guide on how to submit an application for the Collateral
Registry- Initial Registration.

1.2 Collateral Registry- Initial Registration process

1.1.1 Prerequisites
Applicant must have an ecitizen account. The type of account could be:

• Citizens Account
• Foreign Residents Account
• Visitors Account (For foreigners)
• Linked Business account on BRS (eBusiness)

***This manual has been prepared using a Citizens account. Please note; regardless of the account used every-
thing remains constant i.e. the interface and application forms****

1.2.1 Logging In

• Applicant will access www.ecitizen.go.ke on their browser

• Enter their username (Id Number/email address)
• Enter Password
• Confirm there not a robot
• Click enter

Page 51
Page 52
Fig 1

1.2.2 Access Business Registration Service

Page 53
1.2.3 Access the Application form by clicking on Collateral Registry (MPRS)

Fig 2

1.2.4 Select the application from the List

Fig 3
Identify this application and click on the Blue highlighted application form.

Page 54
1.2.5 Open the Application form and add the Grantor details

1.2.6 Add Grantors Details

Important points to note:

• A grantor cold be of several types to choose from; select what is appropriate from the drop down menu
• In Case of a Kenyan Citizen or a Foreign Resident the ID number and name will be verified against the IPRS
database. See Fig 5.1 Add Creditors Details.

Page 55
 Fig 5.1
When the Grantor
is a Kenyan
Corporation

Page 56
Fig 5.2

Page 57
1.1.1 Add Creditors Details

Follow through the figure 6 to add creditor’s details

Fig 6

Page 58
1.1.1 Enter Collateral Details

Important Point to note:

• There are several types of collateral to choose from; choose what is appropriate from the drop down list.

Fig 7

Page 59
The type of information entered below will depend on the type of collateral selected below examples shows that
of motor vehicle.

Fig 8

Page 60
1.1.1 Enter secured loan particulars

Fig 9

Page 61
 Fig 9.1

Page 62
1.1.1 Review the application

Select the tabs to allow you to navigate across the details entered on the application forms as depicted in figure
10

Fig 10

Page 63
1.1.1 View the Notice

Fig 11

Page 64
Below is a sample of the notice

Fig 11.1

Page 65
1.1 Search Request
After the Initial notice an applicant may conduct a search by selectin the search request tab as shown below.

Fig 12

Page 66
1.1.1 Select the Search Criteria

***Important point to note!! Only the grantors Identification and Motor vehicle are searchable***

Fig 13

Page 67
 Fig 13.1

Page 68
1.1.1 Confirm details entered and submit application

Fig 14

Page 69
1.1.1 Make Payment

Client is required to choose their preferred mode of payment. Then follow instructions as provided.

Fig 15

Page 70
1.1 Transferring Ownership of an Application

1.1.1 Applicant logs in and accesses Business Registration Services

Select Application History as shown in the Fig 16

Fig 16

Page 71
Select Transfer Application

Fig 17

Page 72
1.1.1 Select whether transferring to an Individual or Business

Important to note!
The Business function is restricted to entities registered by the Registrar of companies only.

Fig 18

Page 73
1.1.1 For Kenyan and foreign residents, the ID will be verified against IPRS

Fig 19

Page 74
1.1.1 The person receiving the application then Logs in and accepts the transfer.

Fig 20

Page 75
 A win-win for lenders and borrowers alike!
That is why the relationship between lenders
and borrowers should be simple. Now, financial
institutions and other lenders can give credit
against all kinds of movable property, as we
keep the wheels of commerce turning.
MPSR is a Business Registration Service (BRS) online
Registry of security rights in movable property.
Log on to www.brs.go.ke for details and access
to the Registry.

Jipange!
A SERVICE BY THE BUSINESS REGISTRATION SERVICE

Page 76
NOTES

Page 77
NOTES

Page 78
NOTES

Page 79
NOTES

Page 80