It is a sign of relief for borrowers after President Uhuru Kenyatta declined to assent to a bill that would have compelled banks to seize the property of defaulting borrowers before touching guarantors’ assets.
The Contract Amendment Bill 2019 which has since been referred back to the National Assembly for reconsideration sought to change section 3 that lays rules for the signing of agreements.
The President said that the bill in its current form will not only be detrimental to the financial sector but also adversely affect credit advanced to micro, small and medium enterprises.
“Amongst the reasons for his reservations, the President notes that amending the law in the manner proposed in the Bill will negate a long-standing principle of contract law, prejudice the financial sector, and adversely affect credit advanced to micro, small and medium enterprises. The President also objects to the proposal on grounds that it will interfere with the operations of capital markets. Consequently, the President recommends deletion of the said Clause of the Bill, which as a matter of fact, is the primary content of the Bill,” said Speaker Justin Muturi in communication to MPs.
The bill was introduced in Parliament in February 2019 by Juja MP Francis Waititu.
Cases of lenders taking over guarantors’ property when borrowers default on repayment has been on the rise and jolted the MP to seek an amendment of the law.
MPs backed the proposal, saying it will end the current case where creditors target innocent guarantors as low hanging fruits in their bid to collect bad loans, instead of pursuing principal borrowers.
The President also objected to the proposal on grounds that it will interfere with the operations of capital markets.
The Head of State recommended deletion of the said clause of the bill, which as a matter of fact, is the primary content of the bill.
Parliament is required to consider the President’s reservations for 21 days upon receipt of the memorandum.