Collateral & Asset Security Module

The Collateral module (/collateral) manages physical, tangible, and financial assets pledged by borrowers to secure credit facilities. It maintains an institutional asset register, tracks professional valuations and haircuts, enforces dual-control vault custody for original documents, and governs asset revaluation, release, and liquidation.

1. Key Definitions & Concepts

Concept	Explanation
Collateral	An asset pledged by a borrower or third-party guarantor to secure loan repayment, which the lender has a legal right to seize and sell upon default.
Open Market Value (OMV)	The estimated price an asset would realize in a fair, unhurried commercial sale between willing buyers and sellers.
Forced Sale Value (FSV)	The discounted price expected if the asset must be liquidated under urgent auction conditions (typically 65%–75% of OMV).
Valuation Haircut	The percentage reduction applied to the market value to determine the loanable collateral value: $\text{Haircut} = \frac{\text{OMV} - \text{FSV}}{\text{OMV}} \times 100%$.
Loan-to-Value (LTV)	The ratio of the loan exposure to the forced sale value of pledged collateral: $\text{LTV} = \frac{\text{Loan Principal}}{\text{FSV}} \times 100%$. Institutional ceiling is typically 75%–80%.
Perfection of Security	The legal steps required to ensure an enforceable security interest (e.g., registering a chattel mortgage, lodging an official caveat, or endorsing the logbook with the transport authority).
Safe Custody (Vault Register)	The physical security protocol governing original title deeds, vehicle logbooks, and share certificates locked inside the branch dual-key fireproof safe.
Collateral Release	The formal return of physical collateral documents to the owner once all guaranteed loan debts reach zero balance.

2. Pledged Asset Classes & Verification Standards

BiiTrust accepts six primary classes of collateral, each subject to strict documentation rules:

Asset Class	Typical Items	Required Documentation	Minimum Verification Rules
Motor Vehicles & Boda-Bodas	Private cars, commercial vans, motorcycles	• Original logbook • Official transport authority search (e.g., NTSA) • Certified valuer inspection report • Comprehensive insurance policy with bank endorsement	Physical inspection of chassis and engine numbers against logbook; GPS tracker installation for high-risk assets.
Titled Real Estate	Residential plots, commercial shops, agricultural land	• Original Title Deed / Certificate of Lease • Official Land Registry search (dated $< 30$ days) • Registered Valuer inspection report • Local chief or elder boundary confirmation	Physical beacon inspection; verified absence of existing charges or court caveats.
Chattels & Business Assets	Shop inventory, sewing machines, welding gear, generators	• Original purchase receipts/invoices • Serial numbers and maker plates • Geo-tagged site inspection photographs • Signed Chattel Transfer Agreement	Physical tagging and serial verification in borrower’s business premises.
Livestock	Dairy cows, breeding goats, poultry installations	• County veterinary health certificate • Ear-tag or RFID chip registration • Photographic evidence of herd and housing	Local livestock officer verification; death/disease indemnity declaration.
Financial / Cash Collateral	Fixed deposit accounts, SACCO shares	• Signed Letter of Lien and Set-Off • Written bank/SACCO lien confirmation letter	Formal hold placed on withdrawal from the deposit account.

3. Pledging an Asset (`/security/pledge`)

Pledging links an asset to a borrower and active loan facility using a guided 3-step rail:

┌─────────────────────────────────────────────────────────────────────────────────────────────────┐
│ Pledge Collateral Asset                                               Step 2 of 3: The Asset    │
├─────────────────────────────────────────────────────────────────────────────────────────────────┤
│ (1) Behind Whom ────────► (2) The Asset ──────────────────────────────► (3) Confirm & Register  │
│ [ Selected: Peter Otieno ] [ Motor Vehicle / Logbook ]                  [ Pending Valuation ]   │
├─────────────────────────────────────────────────────────────────────────────────────────────────┤
│ Asset Category: [ Motor Vehicle ▼ ]                                                             │
│ Make & Model:   [ Toyota Probox 2016 ]              Registration: [ KDB 489X ]                  │
│ Chassis Number: [ NCP51-0192841 ]                   Engine Number:[ 1NZ-FE-82910 ]              │
│ Physical Location:[ Nairobi West, Gikomba Depot ]                                               │
├─────────────────────────────────────────────────────────────────────────────────────────────────┤
│ Valuation Parameters:                                                                           │
│ Open Market Value (OMV): [ KES 850,000 ]            Valuer Name: [ Apex Auto Valuers ]          │
│ Haircut: [ 25% ] ──► Forced Sale Value (FSV): KES 637,500                                       │
│ Loan Exposure: KES 450,000 ──► LTV Ratio: 70.6% (Within Safe Limit ✓)                           │
├─────────────────────────────────────────────────────────────────────────────────────────────────┤
│ [ Back ]                                                                  [ Continue to Review ]│
└─────────────────────────────────────────────────────────────────────────────────────────────────┘

Steps:

Behind Whom: Select whether the asset belongs to the Borrower directly or a third-party Guarantor.
The Asset: Enter category, unique identifiers (serial/chassis/title parcel), OMV, valuer report date, and haircut percentage. System automatically computes FSV and LTV.
Confirm & Register: Attach digital photos and scanned valuer PDF reports. Click Register Pledge.

4. Vault Custody & Dual-Control Logging

Original ownership documents (Title Deeds, Vehicle Logbooks, Deposit Certificates) represent immense financial value and must be protected against theft or unauthorized release:

Check-In to Branch Safe:
- When an officer collects an original document, it must be logged into the safe custody register within 24 hours.
- Requires dual sign-off: Loan Officer (handing over) and Branch Manager / Vault Custodian (receiving).
- The document is assigned a tamper-evident safe pouch number (e.g., VAULT-POUCH-0482).
Safe Audit Register (/collateral/vault):
- Displays all physical documents currently residing inside the branch safe.
- Periodic surprise vault audits reconcile physical pouches against digital system records.

5. Collateral Release Flow (`/collateral/:hex/release`)

When a loan facility reaches zero balance and is formally closed:

Open the collateral record in /collateral.
Click Release Collateral.
Automated Cross-Check:
- The system checks if the asset is pledged to any other active loan or guarantee.
- If other debts remain open, the system blocks release: “Cannot release: Asset backs active loan LOX-00912.”
Physical Document Handover:
- Vault custodian retrieves the physical document pouch from the safe.
- Record the identity, National ID, and signature of the person collecting the document (must match registered owner or legally authorized representative).
Status switches to Released. An SMS notification is sent to the borrower confirming release.

6. Seizure & Liquidation (Default Recovery)

When a borrower reaches severe delinquency (90+ DPD) and all committee restructuring attempts fail:

Default Notice Issued: System generates statutory 14-day and 30-day demand notices.
Repossession Sanctioned (/collateral/:hex/seize):
- Branch Manager and Executive Director authorize repossession.
- System records the licensed repossession agent’s details and storage yard location.
- Status updates to Seized.
Auction / Private Treaty Sale (/collateral/:hex/liquidate):
- Licensed auctioneer advertises the asset as mandated by local laws.
- Enter the final net recovery proceeds received (e.g., KES 520,000).
- The system automatically allocates funds against the borrower’s debt waterfall:
  - Pays repossession and auctioneer recovery costs.
  - Settles overdue penalties and legal fees.
  - Settles unpaid interest and outstanding principal.
- Surplus Refund: If auction proceeds exceed total debt, the platform credits the net difference to the borrower’s savings account or issues a refund cheque.

BiiTrust User Manual