How movable assets security rights can drive e-mobility plan
President William Ruto takes a group photo with delegates at KICC, Nairobi on September 4, 2023 during the Africa Climate Summit 2023. PHOTO | DENNIS ONSONGO | NMG
Following the close of the Africa Climate Summit in Nairobi, African leaders have adopted a common stance to address climate challenges. This is a positive step, but it is clear that multiple approaches are necessary to have an overall impact.
One important role that the law can play in addressing climate change is to create a framework for action that can spur legal innovation that can solve various climate challenges. E-mobility, for example, is one area that seems to have great potential.
On July 25, 2023, President William Ruto unveiled an electric motor assembly plant at Roam Park in Nairobi. Energy Cabinet Secretary Davis Chirchir disclosed that the State was planning to increase the number of electric motorcycles on the roads by 30 percent to 500,000 in the next two years.
However, electric vehicles are on average 70 percent more expensive than their fuel-powered counterparts. To make e-mobility more affordable, the government has cut taxes on electric bikes and charging equipment.
Value Added Tax (VAT) on all electric bikes has been reduced by 16 percent, and charging equipment is now exempt from VAT. In addition, charging stations will be subject to a lower electricity tariff.
While these tax cuts are a step in the right direction, they may not be enough to make e-mobility affordable for the average Kenyan. Now, how can e-vehicles become affordable, for the masses? How can the process of acquisition, financing, and delivery become fast, seamless, and secure for both the seller and the buyer?
If a financier is involved, how can he be guaranteed his right to receive payment without worrying about a lengthy legal process? This is where the Movable Property Security Rights Act, 2017 (MPSR) comes in.
The MPSR is a landmark piece of legislation that has the potential to spur green financing in Kenya. The MPSR Act provides a clear and transparent legal framework for the creation and enforcement of security interests in movable assets that can be used in green financing.
Green financing makes it easier for businesses and individuals to obtain financing for green projects, such as the purchase of electric vehicles, solar panels, or energy-efficient appliances.
First, the Act allows for the creation of security interests in a wide range of movable assets, including both tangible and intangible assets. Intangible assets include patents, copyrights, trademarks, green bonds and green securities, including carbon credits.
This means that with legal innovation we can leverage intangible assets and use them to secure financing. For instance, if one comes up with an invention that provides solutions to climate challenges they can create a security interest on the patent that will provide financing for the scale up and commercialisation of the invention.
Second, the Act provides for a simple and efficient registration process for security interests, through the MPSR collateral registry, accessible via the e-citizen portal.
This makes it easy for businesses and individuals to register their security interests, in a fast and efficient manner which gives lenders greater confidence in the security they are taking.
Third, the Act provides for a clear and transparent enforcement process for security interests. This means that lenders can be confident that they will be able to enforce their security interests if the borrower defaults on their obligations in the security agreement.
With this legal framework in place, those seeking to venture into e-mobility financing can be assured that whatever financing solution they offer to the e-vehicle purchaser, whether it be a lease, chattel mortgage, a charge or credit purchase, their security interest in the e-vehicle remains safe.
Therefore, financiers can work together with e-mobility providers to come up with custom packages, that allow the purchaser to take quick possession without a lengthy waiting period and excessive paperwork due to the already laid out procedure in the MPSR Act.
In the long run, by providing access to financing for green projects, the implementation of the MPSR Act can help to reduce emissions, increase energy efficiency, and promote sustainable development.
This will in turn attract investment by providing investors with greater certainty about the security of their investments.
This is important because investors are often reluctant to invest in green projects because they are concerned about the risk of default.
