Working with international colleagues to support effective secured transaction systems…
It was a great pleasure to host a delegation from Kenya in Sydney on 31 March and 1 April 2016.
The purpose of the visit was to share Australia’s experience in implementing and operating a central secured transaction register with senior Kenyan government officials, however inevitably we find opportunities like these present a valuable platform for mutual knowledge sharing, growth and collaboration.
I thought I would use this post to highlight some of the things that emerged in our meeting with the Kenyan delegation.
We were pleased to welcome from Kenya:
- Mr Nzomo Mutuku, Acting Director of Financial and Sectoral Affairs at the National Treasury
- Ms Jennifer Ng’ang’a, State Counsel, Office of the Attorney General and Department of Justice
- Ms Beatrice Osicho, State Counsel, Office of the Attorney General and Department of Justice.
It was interesting for us to hear about the issues that have a negative impact on capital flows in the Kenyan economy. For example, borrowers complain about high interest rates, hidden charges and non-disclosure of pertinent information. Lenders are concerned about high default rates, difficulties in foreclosing on collateral through the courts and misapplication of funds by borrowers.
The delegation highlighted that the lack of an effective secured transaction framework is at the heart of these issues.
There are some parallels with the situation in Australia five years ago—it’s not that the relevant laws didn’t exist, but they were not aligned in a modern uniform framework, designed to reduce legal complexity, transactional costs and risks—and support greater transparency and predictability of outcomes for both borrowers and lenders.
So like Australia, Kenya has embarked on an ambitious journey to reform old laws and create new ones that will enable it to better support commerce and growth of its economy. A key component of this reform will be an online register like the PPSR.
Discussions around the supporting technology for the Kenyan register were of great interest to me, particularly as AFSA looks to make investment decisions around significant enhancement or replacement of the PPSR over coming months. Of particular interest was the emphasis on mobile payment mechanisms, which facilitate most banking and lending transactions in Kenya.
Also, although not discussed with the delegation, it is of interest that Kenya is looking to be an early adopter of blockchain (also commonly referred to as distributed ledger technology). Blockchain has the potential to seriously challenge the way traditional transactional systems are managed in the future.
Reflecting on the Kenyan visit has reinforced for me the benefits of engaging with our international colleagues. What I always find with these forums is that no matter where you are in the world, you often confront the same issues and challenges.
Over the last couple of years we have had the privilege to host a number of similar delegations—from the International Finance Corporation (an arm of the World Bank), Indonesia and Kyrgyzstan—and we look forward to more in the months ahead.
Until next time…