WARNING: This is Version 1 of my old archive, so Photos will NOT work and many links will NOT work. But you can find articles by searching on the Titles. There is a lot of information in this archive. Use the SEARCH BAR at the top right. Prior to December 2012; I was a pro-Christian type of Conservative. I was unaware of the mass of Jewish lies in history, especially the lies regarding WW2 and Hitler. So in here you will find pro-Jewish and pro-Israel material. I was definitely WRONG about the Boeremag and Janusz Walus. They were for real.
Original Post Date: 2010-04-05 Time: 15:00:02 Posted By: News Poster
By Mark Kapchanga
Nairobi – Kenya is to streamline its laws on collateral in a move observers say will give a huge boost to the credit market.
Among the Bills targeted in the radical review plan are the Companies Bill, Insolvency Bill, Partnership Bill and Limited Liability Partnership Bill, whose drafts have been submitted to the Attorney General.
According to the Ministry of Finance, when enacted into law, these Bills will play a major role in enhancing access to finance from lending institutions.
Currently, the collateral process has failed to benefit borrowers and protect lenders. Instead, the legal system has increased the cost of credit to borrowers thus limiting their access to it.
Lenders on the other hand say the legal requirements are too skewed – they favour borrowers in case of a default, thus affecting profits.
A study commissioned by the Central Bank of Kenya and Kenya Bankers Association on the legal environment surrounding collateral reveals a highly fragmented system with more than 20 different statutes some of which limit the types of assets that may be pledged.
“There is no uniform code for regulation of security interests in property due to the multiplicity of laws. Many of these statues contain provisions that set different procedures for dealing with similar cases, making the overall process cumbersome, expensive and complex,” the report said.
Despite having numerous collateral laws, interestingly, some inhibit a property owner’s right to enter into a contract and to “alienate” private property.
For example, under the Contract Act, the sale or alienation of an interest in land has to meet special execution and attestation procedures.
“There are special rules regarding the preparation and execution of instruments within and outside Kenya. These rules increase the cost of the collateral process and in some cases make it impossible for certain borrowers to access credit due to the non-availability of persons who can be witnesses to the execution process,” says the report.
What is worrying is that, despite recording a boom in the country, the report says the majority of Kenyan lenders shy away from real estate as collateral, contrary to what is practised widely around the globe.
Lenders cite the expense of the mortgage process as chief contributor, while others blame it on the multiplicity of land statutes as well as differing estates in land.
The collateral process is worsened by the rot in the Lands Office.
The study released mid last week, notes that one has to obtain a land rent clearance certificate from this office to register the collateral, while the owner of the collateral must show proof that he has paid land rent to the same office.
Additionally, borrowers seeking loans through collateral are exposed to exorbitant stamp duty which analysts argue has been one of the major deterrents to creating security interests.
Apart from the cost, the collateral process is complicated by the “archaic physical collection process.”
For properties in urban areas, the stamp duty payable for a transfer is four per cent of the consideration while those based in rural areas are exposed to a two per cent duty.
Where the same property is being offered as a mortgage, the purchaser has to pay additional stamp duty of 0.2 per cent of the mortgage amount.
These amounts are to be paid to the Commissioner of Domestic Taxes and take place physically in three stages: Assessment of duty payable at the Land Registry, payment of duty at a commercial bank citing the serial number and relay of the payment information to the Kenya Revenue Authority which then confirms to the Land Registry that they have been paid.
According to Finance Minister Uhuru Kenyatta, the barriers that exist in the collateral process have posed a great challenge to the business sector, especially micro and small enterprises.
Said he: “These cumbersome and costly collateral processes pose a big challenge to the country’s attainment of Vision 2030. We have to iron out these issues for the financial sector plays a critical role in accelerating growth.”
Currently, the country targets the financial sector to accelerate savings and investment to over 32 per cent and 35 per cent of the gross domestic product respectively.
Mr Kenyatta says the Kenya Law Reform Commission is engaged in the review of commercial and financial laws to improve the lending environment.
Original Source: 
Original date published: 5 April 2010
Source: http://allafrica.com/stories/201004050613.html?viewall=1