The said lender would be left with no recourse at law – a factor that could militate against lenders having confidence in the system.
The Bill ought to provide stronger safety nets in this regard.
There must also be stronger safeguards against the potential for corrupt practices as trust will be paramount to ensure the system works.
The Bill appears to be silent on the question of who possesses the secured property during the period that the loan agreement is in operation.
Clause 21(1) of the Bill seems to suggest that it can be either the debtor or the creditor – presumably depending on the agreement between the parties.
It is my respectful view that insufficient thought has been devoted to the modalities of the possession of the secured movables pending repayment of the loan.
This anomaly has the potential to leave both parties exposed.
If the collateral were an immovable property, this question is answered by the fact that the debtor can continue to hold the property and because it is fixed, this is not risky.
In the case of movables, there is a real risk and possibility that the holder of the movable property can disappear with it or consume it – leaving the creditor exposed.
Criminal sanction is not a sufficient answer to this concern to a lender who simply wants their money back.
Equally, if the creditor is to hold the property, the question becomes – where is it stored?
How can the property be retained in good order?
All that the Bill says in answer to the above at clause 21(1) is that “A debtor or secured creditor in possession of the collateral must exercise reasonable care to preserve the asset.”
The question that arises is, what is “reasonable care”?
In the event that the movable asset is livestock – what happens if the animals are infected by disease or are ravaged by drought despite the possessor’s best efforts?
A possible solution may be to insure the movable property – but, how likely is a small business to be able to afford the cost of such insurance and the all the fees required to be paid at each stage of the process?
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