The use of Movable Property as collateral to secure loans under the Security Interest in Movable Property Registry- SIMPO has gained momentum among the Ugandan population despite the low publicity resulting from the COVID-19-induced lockdown.
Information from the Uganda Registration Services Bureau-URSB indicates that since this year began up to 15,557 properties have been registered, 14,000 searches made to confirm registration, 2,100 assets are still in the registry and over 163 accounts have been opened. At least 18,000 borrowers have been registered and several enforcement notices have been made.
URN has also learned that up to 1,289 default and demand notices have been registered while 46 assets have been disposed of. The remaining lenders and the borrowers have agreed before disposal.
Stella Olimi, the head of the Chattel Securities Registration Unit at URSB told URN in an interview that although the law was passed in 2019, the numbers started increasing drastically when the COVID-19-induced lockdown was lifted early this year;
Under SIMPO it is legally possible to use movable assets such as household items, livestock, farm produce, shares, patents, and copyrights among others to acquire credit facilities. Though the practice of using movable assets for loans has been on for some time it was largely focused on automobiles because they are the only assets that had a law streamlining security interest on such property as collateral.
There was no governing law for other properties until the SIMPO act came into force, which was approved in 2019. The law allows lenders to register security interests on a movable property, which a borrower could have used as collateral against the money they have borrowed. In this way, the lender encumbers any transactions on the registered asset until the loan is paid or in case of default can dispose of it to recover his or her money. The disposal procedure is still stipulated in the same law.
Registration of interest over such property is done by the Uganda Registrations Services Bureau-URSB through the SIMPO registry portal. Creating an account on the system is free of charge but registration of a security interest costs 20,000 Shillings. The registration comes after the loan agreement between the lender and borrower is done because its terms of reference are part of the information needed during registration.
In a sensitization workshop of money lenders about this law, Alex Anganya the URSB deputy registry general said the bureau believes it is not enough to register businesses but it is also working on ways to address the needs of Uganda’s entrepreneurs.
“We are very pleased to partner with UMRA in this training, enabling us to increase our support to small businesses with viable options to increase their capital using their movable properties through our SIMPO registry,” he said.
The SIMPO registry portal is only used by licensed credit-extending institutions money lenders, SACCOs, microfinance institutions Non-Deposit-Taking Institutions, and banks who need to first create an account in the system to access its functions.
The public can use it for searching purposes only. According to this law, the property is allowed to remain under the possession of the borrower, but the lender must oversee its management in the protection of his or her rights and be aware of whatever is going on about it. “It is the responsibility of the lender to manage this property because they have interest in it because, in case of any problem to this property, the loan becomes riskier,” said Olimi.
The same property can be used as collateral for more than one credit facility, but in the case of shared interests, the first lender’s interests, take precedence and must be alerted when another party wants to register interest on the same property, but has no right of objection or approval. In cases of default, security interests become enforceable, and the lender can take possession of the property.
This begins with giving a demand notice, which bears a period that the borrower is supposed to have repaid the loan. If such a period passes without the borrower paying, the lender may register a default and enforcement notice with SIMPO.
“Where a debtor is in default, a secret creditor may sell anyone all of the collateral in its condition or following any commercially reasonable preparation or processing,” part of the law says. It for a hard and stipulates that the seller of the collateral shall be by auction, adding that the creditor shall notify the debtor in at least ten working days, and in case of no objection, the process continues.
Some of the money lenders URN talked to, welcomed the law. Pascal Niwebyona, a money lender with PSD credit limited, says that this law has come at the right time, and has widened the market;
Canary Boogere, a CEO of a Non-Deposit Taking Institution, says that the law is very good for their business but is being by luck of sensitization, and still has some things which need to be streamlined