KBA CEO CHAT - Moveable Assets Credit Opportunities

CEO | Ronald Marambii, Bank of Africa (K), CEO
MONTH | March 2022
Chat Admin
Welcome to the first session of the My Chat with Bank CEO. We are pleased to have you here today.
eric asuma
Looking forward to the Chat with Mr Ronald.
Chat Admin
Our topic for today is Moveable Assets Credit Opportunities and we are honoured to have Mr. Ronald Marambii, the Bank of Africa (K), CEO lead us through this session.
Chat Admin
As we wait for our host, please feel welcome to start posting your thoughts and questions on the topic Moveable Assets Credit Opportunities and the host will take them from 10am.
eric asuma
My first question to Mr Ronald, what was the origin of the MPSR act before it was signed into law by the President in 2017?
Chat Admin
I see many people have already logged in. Lynet, Emmanuel, Issa, John, Hezron, Isabel, Hiram, Bernard, Robert, Dorine, Sharon and Irene. Karibuni sana!
Fredrick Juma
Thank you Admin.... My question to the CEO is; why has the usage of the Moveable Property Collateral Registry been low in Kenya?
Chat Admin
Thank you Erick and Fredrick for the questions. I must say I'm looking forward to learning more about Moveable Assets Credit Opportunities
maina NJUGUNA
We are back to these enlightening chats..... and a good topic. Good morning
maina NJUGUNA
One question I have seen online: Is Ronald Marambii related to former long time National Bank CEO Reuben Marambii?
Chat Admin
Ladies and gentlemen, please welcome our host Mr Ronald Marambii, who will take us through the session.
maina NJUGUNA
Welcome Mr. Ronald Marambii
maina NJUGUNA
What has/is Bank of Africa taking in as moveable assets within the confines of the MPSR Act?
maina NJUGUNA
Also, what is the %age of BoA's loan boak under the MPSR Act moveable assets?
Ronald Marambii
Good morning everybody and thank you for availing yourselves for this chatroom discussion. The chat today is based on the Moveable Property Security Rights Act (MPSR), which came into law in May 2017. Its main purpose was to enable the use of moveable property as collateral for borrowing which was seen as an important step in the promotion of financial inclusion, especially of the Micro, Small and Medium Enterprises (SMEs) which were noted to have insufficient collateral in the form of immovable properties...
JOHN KACHIBO
Good morning,
JOHN KACHIBO
What is your take on lending based on movable assets?
Ronald Marambii
I am looking forward to good discussions on how this Act promotes financial access to a wider majority of borrowers and how moveable securities are now better recognized by law as collateral for borrowings. Welcome to the chat.
Chat Admin
Fredrick Juma..."Thank you Admin.... My question to the CEO is; why has the usage of the Moveable Property Collateral Registry been low in Kenya?"
Korir Issa
How does the MPSR benefit MSMEs from a banking perspective?
JOHN KACHIBO
Any future plans to increase the use of Movable assets based on lending?
Chat Admin
Maina Njuguna..."What has/is Bank of Africa taking in as moveable assets within the confines of the MPSR Act? "
Edith Mukholi
Good morning, my question is what are the risks of movable assets compared to fixed assets in terms of lending?
Ronald Marambii
Hi John. Thank you for your question. I think it is a very good initiative. Lending against moveable properties has always been something that lenders do and with the commencement of the MPSR there is more visibility now on the definition of the moveable collaterals, covering a much wider scope than before and it makes it easier now for lenders to create an interest on a particular moveable asset that they are taking as collateral...
Chat Admin
Erick Asuma ..."My first question to Mr Ronald, what was the origin of the MPSR act before it was signed into law by the President in 2017?"
Ronald Marambii
....the risks still remain on moveable assets but bear in mind that it is not just security that a bank takes into consideration when lending. However, moveable assets gives additional comfort to the bank, when there is no other security available.
EVELYNE musau
Good morning bwana CEO.What is the biggest challenge the banks are facing when using moveable assets as collateral
Ronald Marambii
Fredrick, the usage of the MPSR has been low due to the low level of awareness on both borrowers and lenders.
Ronald Marambii
This chat is meant to enhance awareness on the opportunities the MPSR presents.
EVELYNE musau
What mechanism do banks use to verify ownership of the moveable property to avoid disputes?
maina NJUGUNA
What is BoA's plan on creating awareness on this MPSR Act and the opportunities therein especially to SMEs both within and without the confines of KBA?
Kevin Mulwa
Hi Ronald...How would the rates be calculated?
Victor Munialo
I'd like you to shed more light in how one can access credit facilities by use of IP
Fredrick Juma
I would like to know the key challenges that hinder SMEs from using the MPSR
Ronald Marambii
Hi Korir, the benefit of MPSR to MSMEs is the increased scope of moveable properties covered under the Act, which now now includes even intangible assets such as receivables and a lender can create a security right over those assets pretty easily through the online MPSR collateral platform and by so doing protect themselves against third parties who might want to have some dealings with those assets. In other words, it enables a lender extend credit to the SME...
Ronald Marambii
...and because of the additional comfort of collateral there is a high likelihood of a better pricing in terms of interest rate or a larger amount that will be given to that SME.
Ronald Marambii
Yes, John Kachibo. Lenders are already lending against moveable assets and the credit extended against moveable assets has been increasing as per a survey done by CBK in 2019 which showed about KSh 43 Billion extended through moveable securities.
Ronald Marambii
Hi Maina Njuguna. BOA Kenya has taken mostly motor vehicles, machinery, deposits in bank accounts and inventory all of which are now covered under the MPSR.
Ronald Marambii
Hi Edith. There are a couple of risks including loss of identity of assets( what the Act calls commingled goods). There is also the danger of these moveable assets being sold to a holder in due course. The other risk is that there could be double registration because the Act is not very clear on how to identify the moveable asset. Not all moveable assets will have a unique identifier e.g number plate on vehicle or serial number on a machine...
PATRICK MWAURA
Hi Ronald. What does the ACT provide in terms of mitigation of some of the risks highlighted.
Ronald Marambii
Erick Asuma, that is a very interesting question. I may not have the answer or insights to that. However, the MPSR was replacing the Chattels Transfer Act which was rather limiting in terms of moveable goods that could be used as security (machinery, stocks, crops, wool)
Getrude Matayo
Hello sir. How can the usage of the MPSR be enhanced?
Ronald Marambii
Evelyne, for verification of ownership this is possible on a number of moveable assets like motor vehicles, deposits and machinery but a number is difficult to verify ownership. This Act relies on good faith from all parties to a transaction.
eric asuma
What happens in a situtaion where the assets grow/ decline in value? Give the case of land or shares in a listed company. Will the pricing take into account the value growth or decline?
maina NJUGUNA
Between individuals and SMEs, who has a higher chance to use moveable assets as security for loans?
Ronald Marambii
Hello Kevin, the issue of interest rates is one that has been a topic of discussion over many years in this market. Currently banks are on what we call risk priced models of calculating interest rates for particular borrower. What is interesting is that collateral helps to reduce the cost of risk and therefore a good risk price model would return a lower interest rate for a borrowing that is collateralized as opposed to a non secured one. The interest rate takes into account cost of funding, administrative costs, cost of risk, return on capital.
JOHN KACHIBO
What's your take on intellectual property as KBA, OR How are individual banks treating Intellectual property when it comes to it being used as collateral?
Fredrick Juma
Mr. Ronald, I love your precise answers.... Learning a lot today... Things I never knew.
Ronald Marambii
Hi Victor Munialo, your question is something that has most lenders thinking cap on because IP is becoming more important and prevalent in the these new age economies. There are still challenges on enforcement and also on valuation of IP and this makes it difficult for lenders to consider IP as collateral. Currently what we are seeing is venture capitalists and angel funds investing in IP. This may change as the issues are addressed.
Ronald Marambii
Hi again Fredrick, I believe one of the key challenges that hinder SMEs is awareness on collaterals that are now possible to be used as collateral, and their informal nature where there is absence of financial records/data
Korir Issa
Hi Ronald. I'm wondering, most financial institutions typically take a profit-driven approach to assessing whether to provide new inclusive finance products. How does this affect SMEs in terms of movable assets?
Ronald Marambii
Hi Getrude, a lot will do with awareness through financial literacy which is what Kenya Bankers Association in conjunction with other partners is doing for example the KBA Inuka Enterprise Program.
Ronald Marambii
Hi Patrick, the Act gives a number of remedies to a secured creditor including suing the grantor, appointing a receiver for the moveable asset, lease out the moveable asset, take possession of the moveable asset, sell it. To protect your right as a lender on a moveable security you must register a notice in the MPSR and you must also have a security agreement. Once you register a notice, a third party cannot have a higher interest than you on that asset.
Ronald Marambii
Hi Maina Njuguna, your question is interesting in the sense that both have similar chances of using moveable assets as security, maybe the issue would be who is more likely to get a facility against a moveable security. That again would depend on the profile of the borrower because it is not only security that lenders take into account.
Ronald Marambii
Hi Maina Njuguna, the percentage of Bank of Africa Kenya loan book under MPSR is about 10 percent, but it would differ for different banks depending on their risk appetite and in particular products developed to take advantage of the provisions of MPSR
Ronald Marambii
Thank you, Fredrick Juma.. I am glad that we are communicating.
Edith Mukholi
With banks getting the greenlight to analyse customer risks before issuing loans, Banks now have the opportunity to surpass the average of 13.5 per cent interest on loans depending on the customer's risk levels. Is it evidence to conclude that Movable assets will fall into this category due to the high risks involved?
Ronald Marambii
Hi John Kachibo, thank you for your interest in IP, which is an important topic in todays world. I would encourage you to be on the lookout of the KBA Chat on IP which will be held in two week's time from today.
Chat Admin
Hi everyone, our time is almost out and our host will be wrapping up the session soon
maina NJUGUNA
Which products has BoA developed for their customers under the MPSR Act for both individuals and SMEs?
Ronald Marambii
Hi Korir Issa, Whilst banks have a profit-driven approach but it is more than that. It is now more of a sustainability approach to profit making which means banks are more conscious of their roles and effects to society and banks also appreciate the key role that SMEs play to the growth of a stable economy and as such development of new products takes a wider approach than just purely profit but more on sustainable economic development. A bank cannot develop outside a sustainable economy.
Ronald Marambii
Hi Edith, I believe the opening up for banks to risk-price loans will result in the much needed acceleration of private sector credit growth which has been subdued since 2016 and is currently at low levels of about 8 percent. According to the Central Bank Governor if we are to grow our economy at 15 percent GDP growth per annum we need to attain a private sector credit growth rate of 15 percent per annum. We are far from that. We currently have SMEs borrowing at very high rates through mobile loans which makes it difficult for them to grow. So whereas it is possible that will see credit being extended at rates above 13.5 percent as you have mentioned it would still be within the parameters of the risk based model and most likely at rates that they are currently getting.
Ronald Marambii
Last response due to time is for Maina Njuguna regarding products developed under MPSR by BOA and that would be asset finance for both customers and non customers.
Ronald Marambii
Thank you very much everyone. Those were very engaging questions and it is quite clear there is a lot of interest on the MPSR Act and the provisions it has provided for extension of credit to a wider range of borrowers. Banks under KBA will continue educating the public on the opportunities emanating from this initiative of the Government as we pursue our Vision 2030 as a country. Thank you so much everyone and wishing you a pleasant weekend.
Chat Admin
Ladies and gentlemen, help me in thanking our host Mr. Ronald Marambii, Bank of Africa (K), CEO for taking us through an insightful chat session this morning
Chat Admin
We also thank you all for your participation by way of insightful questions, comments and your presence in the chat.
Chat Admin
Incase you joined late, do not worry as you will still be able to access the chat transcript of today's session on this website.
JOHN KACHIBO
Thanks a lot Mr. Ronald for your time. Looking forward to more of such candid engagements. Have a good day ahead!
Chat Admin
We look forward to having you here next week for another insightful session on Islamic Finance Business Expansion Opportunities. Our host will be Peter Makau, DIB Kenya, CEO. Thank you once again and have a pleasant day and weekend.
Chat Admin
We shall now close the chat room.