Ideas & Debate

Using intellectual property as collateral for credit access


The Movable Property Security Rights Act, (“MPSRA”) was enacted in 2017 to provide the legal framework for using movable property such as intellectual property rights as collateral for credit. This was the first time in Kenya’s legal history for intangible assets to be recognised as valid collateral for accessing credit from financial institutions.

Unfortunately, however, three years down the line, the possibility of accessing credit on the security of intellectual property rights remains a mirage.

Intellectual property rights protect the creations of the mind. The most common forms are trade marks, patents, copyright and industrial designs and are protected under various statutes. The Constitution of Kenya, 2010 requires the Government to promote and protect the intellectual property rights of the people of Kenya.

The challenge of popularising intellectual property rights as collateral for credit is not unique to Kenya. There are inherent concerns associated with the actualisation of the concept. This includes valuation of the intellectual property rights.

Due to their intangible nature, it is not easy to ascertain the correct value of these rights compared to physical assets such as land or motor vehicles. IP valuation requires the use of highly skilled and specialised professionals, who are few in Kenya. Accurate valuation enables a lender to ascertain if a transaction is commercially viable. The ability of lenders to find a ready market to sell the intellectual property rights in the event of default by a borrower and in the most efficient and cost-effective way is another challenge which most lenders are unwilling to deal with.


The economic value of integrating intellectual property rights within the financial system cannot be over-emphasised in a country where most businesses do not have tangible assets such as land which are traditionally preferred as collateral by financial institutions. A start-up technology company would receive a big boost if it were able to obtain credit on the security of the intellectual property comprised in its applications. Such a business would then use the resources to grow its business to an international level technology company and significantly contribute to the economy through employment creation, payment of taxes, among others. Research-based companies would greatly benefit from the use of their patents to secure credit. With rising innovation and technological developments in Kenya, investment in such companies is a pressing economic need.

It may, however, take time before Kenyan banks start appreciating the strength of collateral based on an intangible asset which is generally considered high-risk in the event of default.

At the international level, various countries have implemented innovative measures to promote the use of intellectual property backed financing, especially by Small and Medium Enterprises (SMEs), in recognition of the vital role that the intellectual property financing plays within the economic systems. For instance, in 2014, the Intellectual Property Office of Singapore introduced a reported $100 million IP Financing Scheme in collaboration with participating lenders to help businesses use their intellectual property to secure lending. Guided by the 10-year IP Hub Masterplan introduced in 2013, Singapore set up the Centre of Excellence for IP Valuation to help in accreditation and capacity building of specialised intellectual property valuers and standardise the valuation process. The Malaysian Roadmap for Intellectual Property Monetization 2015-2020 supports the use of intellectual property to boost economic growth alongside other initiatives such as creation of IP Valuation Training Module and IP Valuation Model. Malaysia is, however, still facing a challenge of reduced public awareness of the economic value of intellectual property hence these measures have not benefited its citizens to full capacity as intended.

United States, Japan and China have also developed almost similar measures. Lessons learnt by these and other countries are important to Kenya as we shape our own intellectual property backed finance system.

Greater sensitisation of lenders on the value of intellectual property as valid collateral is required. Owners of such rights, for their part, should invest in the valuation of their intellectual property rights to convince the lenders that intangible assets are as valuable as physical property. Owners of intellectual property rights who have not taken measures to have them legally protected are encouraged to do so as it then becomes easier to successfully negotiate financing deals with lenders. All stakeholders have a duty to contribute to the creation of an economically powerful and efficient intellectual property backed finance system in Kenya.