NCBA made headlines this week for collaborating with artists to co-create a new credit product aimed at financing artists and the creative industry, which contributes about KSh110 million to the economy. 

If launched, NCBA will be a pioneer not only in East Africa but also across the continent in the actualisation of the Movable Property Security Rights Act, 2017. The law allows the use of movable property, including intellectual property, as collateral for credit.

Many artists in Kenya struggle to fund their work because their assets do not fit traditional banking models. Music and artistic productions are expensive, and most banks, even globally, are still grappling with how to use intellectual property as collateral due to challenges of valuation, fluctuating market prices, and ambiguity over enforcement.

To address this, NCBA is co-designing the product with artists, allowing for flexible repayment timelines and tailored credit terms. The programme is expected to launch in December, with the bank currently fine-tuning its credit systems to align with artists’ irregular income patterns.

Since the enactment of the Movable Property Security Rights Act, 2017, data from the Business Registration Service (BRS) shows that Kenya’s Collateral Registry has recorded security rights over intellectual property assets, although uptake remains limited.

Though still rare in Africa, landmark IP-backed deals are emerging. In late 2024, African Export–Import Bank (Afreximbank) and New World TV closed a €245 million facility to finance the broadcaster’s acquisition of exclusive sports media rights across 24 African countries. The loan, secured by broadcast licensing rights, will be repaid from revenues generated by those rights.

Globally, IP finance is well established as a mainstream form of secured lending. In the United States, musician David Bowie pioneered the concept in 1997 with a $55 million bond backed by future royalties from 25 albums, effectively transforming his music catalogue into tradable securities. More recently, major US chains such as Domino’s Pizza, Dunkin’, and Subway have raised billions through whole-business securitisations, using their trademarks, franchise agreements, and royalty streams as collateral.

Managing Risk and Unlocking Capital in IP-Backed Lending

However, IP financing continues to face serious hurdles, the most persistent being valuation. Determining the monetary value of intellectual property remains complex due to the lack of a standard, uniform valuation framework. Take, for instance, the copyright of a hit song used as collateral in today’s digital economy. Its value fluctuates constantly, driven by streaming trends, public demand, and the overall market performance of the artist’s catalogue. This volatility makes consistent valuation and reliable lending inherently difficult. To compound this, the lack of granular data on specific IP asset values, even for mature businesses, hinders reliable benchmarking. 

To navigate this hurdle, the International Valuation Standards Council (IVSC) has issued guidance on the valuation of intangible assets in IVS 210. Among others, IVS 210 covers the bases of value, valuation approaches and methods, the market approach, the income approach, the cost approach, special considerations for intangible assets, discount rates/rates of return for intangible assets, intangible asset economic lives, and tax amortisation benefits. IVS 

IP-backed loans are likely to be priced at rates similar to unsecured lending, making them unattractive to most borrowers. This is because regulatory standards require lenders to maintain minimum core capital reserves to withstand market shocks. Since intellectual property is considered a volatile, high-risk asset, banks tend to price such loans conservatively, offsetting the uncertainty with higher interest rates. Revising banking regulations could allow lenders to reduce the capital they need to hold for loans secured by IP and related intangibles. Even though changes to banking regulations require coordinated international work, they are worth considering.

Enforcing repayment on loans secured by tangible assets, such as land or equipment, is far simpler than enforcing repayment on loans secured by intellectual property. Lenders face significant challenges in disposing of intangible assets, which are often difficult to convert into cash. This uncertainty discourages many commercial lenders from entering the IP finance space. Regulatory concerns about the limited recoverability of intangible collateral have also led to high capital adequacy requirements intended to offset perceived risks.

To address this, specialised insurers, development banks, and state-backed programmes are experimenting with ways to rebalance risk. Collateral protection insurance allows lenders to safeguard against the loss of value from illiquid assets by guaranteeing recovery of part of the collateral’s worth in case of default.

In South Korea, for example, government-backed institutions such as the Korea Development Bank and the Industrial Bank of Korea provide guarantees that reduce risk in IP-based lending. A USD 60 million IP recovery fund, created in partnership with the Korean Intellectual Property Office, assists firms in financial distress. These initiatives helped IP-backed lending exceed KRW 3 trillion (about USD 2.2 billion) in 2022, drawing participation from major lenders such as Woori, Shinhan, and KEB Hana Bank.

Private sector actors are also playing a role. Aon Intellectual Property Solutions offers collateral protection insurance supported by continuous valuation monitoring. Its AI-driven system assesses IP assets in real time and has facilitated more than USD 1 billion in IP-backed transactions by enabling insurers to underwrite default risk. Together, these mechanisms show how innovative risk-mitigation tools can encourage broader participation in IP finance.

Conclusion

The World Intellectual Property Organisation estimates that over the last 25 years, intangible asset value has increased 13-fold, reaching an all-time high of USD 80 trillion in 2024. It is, therefore, incumbent upon forward-looking financial institutions to leverage their growing asset portfolio and explore innovative ways to provide credit access to IP rights holders. Learnings can be drawn from jurisdictions with forward-looking debt financing models, such as government-backed credit guarantee schemes, the establishment of recovery funds for distressed IPs and the issuance of collateral insurance by insurance companies.