Parliament has not received a single memorandum on a Bill that seeks to compel creditors to seize the assets of defaulting borrowers before touching a guarantor’s property.
This is despite the National Assembly asking individuals and organisations to submit views ahead of the reintroduction of the Laws of Contract (Amendment) Bill, which was first tabled by the late Juja MP Francis Waititu in 2019.
The Bill, which wanted banks to first deal with the assets of the principal borrower before seizing those of guarantors, was shot down by former President Uhuru Kenyatta.
Mr Kenyatta refused to assent to the Bill on grounds that it would prejudice the financial sector if enacted in its current form.
The National Assembly failed to marshall the two-thirds (233) of MPs needed to overturn the President’s memorandum.
The Bill has been republished by Ruiru MP Simon King’ara and is set to be read for the first time after Parliament reconvenes from a short Easter recess tomorrow.
“The Bill is currently undergoing public participation. As of yesterday, no memorandum had been received yet this Bill has been published,” parliamentary legal experts attached to the Justice and Legal Affairs committee told MPs during the scrutiny of the proposed law last week.
Justice and Legal Affairs committee chairperson Gitonga Murugara (Tharaka) said MPs will push through the Bill and hoped that President William Ruto will sign it into law.
“We hope the new President will sign this Bill into law. Banks in their own wisdom do not value property well when they sell the property of the principal borrower to recover the loan. When they see the property does not fetch a good price to recover the loan, they quickly call guarantees,” Mr Murugara said.
“The bank realises its money from guarantors to the benefit of the principal borrower. We hope that lawyers like me who had objections to this Bill will see reason and support it this time round.”
Mr Kenyatta in February 2021 argued that some sections are likely to affect creditors by making debt recovery longer and more expensive, as well as affording guarantors the opportunity to dispose of assets to avoid the realisation of security when debts go unpaid.