Earlier this month (March 19), Kenyan President Uhuru Kenyatta ratified a new digital transaction bill, now the Business Law Amendment Act, which is aimed at improving digital presence in the country while enhancing the ease of doing business. The bill, which was introduced in the National Assembly in November 2019 would reduce costs and time spent on certain transactions in the country.

The East African nation was ranked 56th in the World Bank Ease of Doing Business Index 2020, an improvement on its positions in the last four years. Rwanda and Morocco are the only African countries ahead of Kenya with 38th and 53rd positions in the index.

Nairobi’s progress has been linear, however – it ranked 61st in 2019, 80th in 2018, 91st in 2017 and 108th in 2016 – and was strengthened due to improved access to credit by the introduction of online registration, modification and cancellation of security interests, and public online searches of the collateral registry.

This development prompted the country’s efficiency gains for the economy in online tax systems and registries, while property registration was also made faster by moving consents to transfer and payment online verification. 

More so, Kenya’s ranking was improved due to the easier process of obtaining construction permits and reliable electricity supply, while debtors are also assured of a continued business during insolvency proceedings.

The steady progress is set to receive a huge boost with the new law, which brings about significant changes to the digitization of transactions, including the land transaction. Although various statues have been amended to permit electronic signing of documents and the creation of electronic registries, the law now provides for electronic signatures for documents that are expected to be able to identify the signatory and indicate the signatory’s approval to be signed in the document.

With amendments to the law, land transactions can now be performed electronically through the processing and execution of instruments relating to land. Any instrument relating to land is expected to be processed and signed electronically as well, thereby negating the need for paper in land transactions. But this is under delay as land registries are yet to create electronic records to be fully digitized.

However, one will not require land rent and lant rates clearances before selling their land or obtaining a loan, using it as security. This reduces the number of documents required for purposes of registration of instruments relating to land. As such, the timelines for the completion of land transactions will reduce.

Similarly, the Companies Act has now been amended such that the companies are expected to do away with the requirement to affix their common seal when executing documents. This will enable directors of the companies to sign contracts by way of electronic signature.

The signing of the digitized transaction into law is geared towards easing insolvency proceedings for creditors, thereby allowing courts to take into account the perishability of an asset and whether or not it is used to maintain a company as a going concern before lifting the moratorium imposed under the Act to protect secured creditors right. The law is expected to entice international and local financiers to invest in Kenya because of lender protection in the event of apparent borrower insolvency.

Following the amendment, Kenya is placed ahead of other developing economies in the region in the deployment and use of digital technology. This move also addresses how the mobile financial services revolution enables the government to implement its e-governance strategy to better provide a range of services and opportunities to beneficiaries of public programs, businesses, taxpayers and investors, as well as dynamizing the private sector. 

Even as it contributes to strengthening state capacity, the digital revolution makes new demands on the state, more importantly, addressing several challenges that Kenya will need to address in order to further consolidate its success. These include improving connectivity across the country, ensuring a fully interoperable mobile payments platform and implementing measures to strengthen consumer protection. 

By Ahmed Iyanda.

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