JMK Partners Advocate



In Kenya, as in many parts of the world, borrowing money is often a necessary step for individuals and businesses alike to achieve their goals. Whether it’s funding a business venture, buying a home, or covering unexpected expenses, taking on debt can provide the financial flexibility needed to make things happen. However, borrowing also comes with risks, and lenders often require security to protect their interests. So, what exactly is security for debts, and how can it be realized in Kenya? Let’s dive in.

Understanding Debt and Security

Debt is simply money borrowed with the promise of repayment, usually with interest, over a specified period. Lenders, whether banks, financial institutions, or individuals, seek assurance that they will be repaid. This is where security comes into play. Security for debts is essentially collateral provided by the borrower to the lender as a form of guarantee. If the borrower fails to repay the debt as agreed, the lender has the right to seize the collateral to recover their losses.

Legal Framework

Securing debt involves more than just an agreement between the borrower and the lender. It’s a legal journey governed by specific laws and regulations designed to protect the interests of all parties involved. Understanding these legal provisions is crucial for both borrowers and lenders to navigate the debt landscape effectively. Securing debt is primarily governed by the following key legislations:

  • The Land Act (2012):  The Act outlines the various forms of land tenure, including leasehold and freehold titles, which can be used as security for loans. It also provides provisions for the creation, transfer, and enforcement of security interests in land.
  • The Land Registration Act (2012): This legislation provides for the registration of security interests in land, including mortgages and charges. It outlines the procedures for registering and enforcing security over immovable property.
  • The Companies Act (CAP 486): For loans secured by company assets, the Companies Act regulates the creation, registration, and enforcement of security interests over company property.
  • The Movable Property Security Rights Act (CAP 499A): This law governs the registration of security interests over movable assets (both tangible and intangible), such as motor vehicles, crops, machinery, livestock, receivables, choses in action, deposit accounts, electronic securities and intellectual property rights
  • The Insolvency Act (CAP 53): In the event of borrower default, the Insolvency Act outlines the procedures for creditors to recover debts through insolvency proceedings, including liquidation and administration.

A Spectrum of Assets

Within Kenya’s diverse economic landscape, an array of assets can be used as security for debts, including:

  • Real Estate: Properties such as land, buildings, or homes can be pledged as security for loans. This type of security is common in mortgage financing, where the property being purchased serves as collateral.
  • Vehicles: Cars, trucks, and other vehicles can also be used as security for loans, particularly in auto financing or vehicle loans. The lender may hold the vehicle’s logbook (ownership document) until the loan is repaid.
  • Financial Assets: Savings accounts, fixed deposits, stocks, and bonds can be pledged as security for loans. These assets provide a source of funds for repayment if the borrower defaults.
  • Business Assets: Equipment, inventory, and accounts receivable can be used as security for business loans. This type of security is common in asset-based lending, where the value of the business’s assets determines the loan amount.

Realizing Security

Securing debt in Kenya involves a series of practical steps, often starting with the negotiation of loan terms and culminating in the enforcement of security in the event of default. Here’s a simplified overview of the process:

  • Negotiation and Documentation:  The borrower and the lender negotiate the terms of the loan, including the type and nature of security to be provided. This is documented in a loan agreement which sets out the rights and obligations of both parties.
  • Registration: Depending on the type of collateral, security interests may need to be registered with the relevant government authorities. For example, charges over land are registered with the Ministry of Lands, while charges over company assets are registered with the Registrar of Companies.
  • Possession: This arises in specific transactions, such as when a debt is secured by an informal charge over land. In such cases, the lender may assume physical possession of the title deed of the land.
  • Enforcement: In the event of borrower default, the lender has the right to enforce the security to recover the debt. This may involve selling the collateral through a legal process or taking other appropriate action to recover the outstanding amount.

Conclusion: Balancing Risk and Reward

Whereas debt can be a powerful tool for achieving financial goals, it also carries risks. Security for debts provides lenders with a measure of protection against these risks, allowing them to extend credit more confidently. For borrowers, understanding the types of security available and the process for realizing security can help navigate the borrowing landscape more effectively. By striking the right balance between risk and reward, borrowers and lenders alike can make informed decisions that support their financial objectives.

At JMK Partners Advocates, we recognize the importance of sound legal advice in matters of securing the repayment of debt. Our firm features a team of competent and experienced lawyers well-versed in relevant laws and regulations governing debt transactions. Whether you’re a borrower seeking financing or a lender extending credit, our team is here to provide expert guidance and support every step of the way.

This article is for informational purposes only and should not be taken to be or construed as a legal opinion. For more insights, please do not hesitate to contact