Lenders can no longer rely solely on land titles. Since the Movable Property Security Rights Act 2017 (MPSRA), Kenyan borrowers can pledge stock, equipment, receivables, and even intellectual property as collateral, provided the security right is properly created, registered, and enforced.
What is a security right under the MPSRA?
A security right is a property right in a movable asset that secures payment or performance of an obligation. The Act covers both possessory and non-possessory security, financial leases, and retention-of-title arrangements. Crucially, it introduced a single national electronic registry administered by the Business Registration Service, replacing the fragmented charges and bill-of-sale regimes.
How is a security right perfected?
Creation requires a written security agreement. Perfection, which gives the lender priority against third parties and insolvency administrators, is achieved by registration in the Movable Property Security Rights Registry. Priority generally follows the order of registration, which makes early filing a practical necessity rather than a formality.
What can go wrong without legal advice?
Common defects include describing the collateral too narrowly, registering against the wrong debtor identifier, and overlooking conflicting security already registered. On enforcement, lenders must follow the Act’s notice and sale procedures, shortcuts expose lenders to borrower claims and can delay realisation.
Creation, perfection and priority
A security right is created by a written security agreement that identifies the debtor, the secured creditor, the obligation secured and the collateral with enough precision to make it identifiable. Registration in the national registry perfects the right against third parties and is the step that makes the security effective in insolvency.
Priority generally follows the order of registration, not the order in which the loan was advanced or the agreement signed. A lender that advances funds before registering may find that a later lender has priority. The debtor identifier must match the registry record; a misspelt company name, a wrong registration number or an outdated name after a change of name can undermine the filing.
What can be used as collateral
The Act covers a broad range of movable assets, including inventory, equipment, receivables, bank accounts, intellectual property and proceeds. It also recognises possessory security, non-possessory security, financial leases and retention-of-title arrangements. The precise description matters: a generic reference to “all assets” may not be enough if the registry record or the agreement does not allow the collateral to be identified.
The registry record in practice
The registry is only as good as the data filed in it. Register against the debtor’s exact legal name and registration number, and repeat the search under any former or trading name. A filing that does not match the debtor identifier may not be found by a later searcher, which undermines the notice function the registry is meant to perform.
Describe the collateral with enough detail to identify it, including the category, location and any proceeds. A description that is too narrow may leave later-acquired assets unperfected, while a description that is too vague may be challenged. For receivables and inventory, review the description as the business changes and keep the security agreement aligned with what is registered.
Keep the registration acknowledgement, the security agreement and the search results together. On a release or an amendment, file promptly and keep the confirmation, because a stale registration can rank ahead of a later lender and mislead a search.
Enforcement
On default, the secured creditor may enforce the security right in accordance with the Act and the agreement. The usual steps include notice to the debtor and any other interested party, taking possession or control of the collateral where permitted, and sale or other disposition. The proceeds must be applied in the order the Act requires, and any surplus accounted for.
The courts apply those steps strictly. In Momentum Credit Ltd v Idd [2026] KEHC 15896 (KLR), the High Court upheld a finding that a lender’s repossession and sale of a motor vehicle were unlawful because the lender had not proved service of the notification required before enforcement under the Movable Property Security Rights Act 2017, and confirmed that the burden of proving service lay on the secured creditor.
Shortcuts create risk. A lender that sells without the required notice, fails to obtain a proper valuation or ignores a competing registered interest may face a claim from the borrower or another creditor. Enforcement should be documented step by step, with a clear record of the default, the notice, the marketing and the sale.
Lender checklist before drawdown
- Obtain a current registry search against the correct debtor identifier.
- Check for prior registrations, including registrations under earlier names.
- Describe the collateral specifically, including proceeds where appropriate.
- Register promptly after signing and before advancing funds.
- Check corporate authority and any negative pledge in existing finance documents.
- Diary renewals, amendments and discharges.
- For enforcement, follow the statutory notice and sale process and keep a full record.
Common defects
Recurring problems include registering against the wrong entity, describing the collateral too narrowly, failing to register at all, ignoring a prior ranking, and enforcing without the required notice. These defects are usually easier to prevent than to cure after default.
Our banking and securities team in Nairobi documents, perfects and enforces security rights for lenders and corporate borrowers. Contact us for a confidential consultation.
Primary sources: Movable Property Security Rights Act 2017; Business Registration Service (movable property registry); Momentum Credit Ltd v Idd [2026] KEHC 15896 (KLR).
Related guidance
banking and securities lawyers in Nairobi. Related reading: summary judgment for liquidated claims · enforcing judgments in Kenya · money laundering under POCAMLA.
This article is general information, not legal advice.