Situational Analysis

Eight years later, the question as to whether IP assets, can now be conveniently used to secure financing in Kenya, can only be theoretically affirmed. A juxtaposed position with the practical reality, speaks to a retarded, undefined and unpredictable practice, pointing to a glaring challenge in buttressing IP Assets
collateralization within our Kenyan financial systems.

It ought not to be lost on us, that Kenya has established, robust legal and institutional frameworks on intellectual property, with abearing in shaping the IP Assets collateralization phenomenon.

The framework is comprised of statutory bodies such as Kenya Industrial Property Institute (KIPI), Kenya Copyrights Board (KECOBO), and Anti – Counterfeit Authority (ACA), established under the Industrial Property Act, The Copyright Act and the Anti-Counterfeit Act respectively.

The determination of value of IP Assets, equally remains an explored scope of practice, rendering it a challenge to determine viability and sums of financial advances against IP assets.

Unlike other types of assets, there still remains
inadequate expertise for the valuation of IP assets, which in turn translates to a ripple effect in the consequent acceptability deficit. It however must be noted that this shortcoming is not peculiar to the Kenyan system, but has indeed been a subject of international concern, causing WIPO to convene a myriad of meetings to standardize IP valuation criteria.

The Most notable sitting by the WIPO to interrogate the IP Assets valuation subject was held in 2023, dubbed “Expert Consultative Group on the Valuation of Intangible Assets”

Also, in a WIPO meeting dubbed “IP Finance Dialogue 2025” , the Assistant Director General of WIPO, Mr. Marco Aleman, expressed the commitment by WIPO, to bridge the gap, noting that it is only by doing so, that the full potential of IP Assets can be realized. Suffice to say, therefore, the establishment of a robust IP assets valuation remains a challenge but with the specific focus directed by the highest policy formulation bodies, it can only be termed as working progress.

On the other hand, the existence of rights and proprietorship status of IP Assets within the Kenyan established legal framework, is pegged on innovation and creation, and not on registration. Without any claim by any adverse party to the proprietorship of IP Rights before adoption as collaterals, it may be difficult for prospective lenders to be indemnified of any such claim by an adverse party, should such occurrences be preceded by adoption of the specified IP Assets as collaterals.

The unpredictability of Proprietorship Rights of unregistered IP assets remains an impediment to realization of IP Assets collateralization in Kenya. It is however noteworthy that registration of IP Assets is a subject, comprehensively addressed by the dominant intellectual property legal framework as highlighted above. 

Creators and innovators, therefore, need to take advantage of the avenue, to register their IP Assets, which would in turn, boost more confidence with financiers 

This would in turn enable Intellectual Property proprietors to unlock the much needed capital and income from securitizing their IP Assets with financial institutions. It will equally open up new opportunities for banks and financial institutions to enhance their customer base to a previously non-existing structure. 

Finally, it is undeniable that the awareness by the general Kenyan Population, of the collateralization opportunities of IP Assets under MPSRA, remains considerably minimal, even with the lapse of time since the MPSRA enactment.

The buck stops with the mandated statutory bodies, to prioritize awareness to the general public and sensitize the Kenyan innovative population, to take advantage of the IP collateralization opportunities to enhance their access to credit.

Conclusion
With the enactment of the MPSRA 2017, Kenyans are now empowered to leverage their IP assets as collateral to access financing within the established financial system. Kenya is home to a highly innovative and creative population whose intellectual capital presents immense untapped economic potential.

Kenya already benefits from a robust legal and institutional framework, reinforced by its longstanding membership in WIPO.  In the interim, prioritizing public sensitization and awareness by the relevant statutory bodies will accelerate adoption and build early momentum toward achieving the desired reforms.

According to Faster Capital, Moderna Therapeutics, a biotech firm based in the USA, reportedly utilized its intellectual property rights, to secure financing of at least $500 million, from Morgan Stanley in 2018, yielding an enhanced financial capacity particularly to the Intellectual property proprietor. This, among other major transactions of a similar nature, is a living pointer to the fact that there lies massive opportunities worth tapping, in IP Assets collateralization.

Suffice to say, the IP Assets collateralization avenue presents an incredible opportunity, to the Kenyan innovative population, for unlocking of the much-needed capital. It equally presents financial institutions with a new customer base worth tapping into.

Disclaimer
If you have any queries relating to the above, please do not hesitate to contact James Wairoto or Paul Makumi. 
Please note that this publication is meant for general information only and should not be relied upon without seeking specific subject matter legal advice.