Assets are wealth. Wealth is used to improve people's welfare. In the developed world every asset starting from land to household goods are documented. Every asset has a document representation. The documents representing the assets are registered. People in the west use the assets registration as capital. The registrations can be used to obtain loans and can be traded.
The assets therefore, through registered representations are used as capital. In our world we have vast amounts of assets. In addition to a home, for example being used as shelter, it lives a parallel life as a capital instrument that can betraded or used to raise capital. Our assets are useful only in the primary sense. Our assets represent a lot of capital. Without representations, and therefore ways to use them as capital, our assets are dead capital. It is time to put life in our assets and generate trillions of shillings for use in starting businesses.
In the not too distant future, we shall create and start using our assets for creating capital through spontaneous development. In Kenya in general we need to start that now. Spontaneous adoption is unpredictable in terms of time. NDC would like to prompt the key players in the process of creating capital so that we can start using those methods now.
The key players in a property system that converts assets into capital are politicians, lawyers and finance professionals. NDC has involved politicians, lawyers, finance professionals, borrowers into a meeting room to discuss how a property system to help convert the vast assets Kenyans hold into capital can be built.
On its search for solutions, CRM is guided by the book The Mystery of Capital by Hernando De Soto. The Central idea by De Soto is that many people have a lot of assets that cannot be turned into capital for production. De Soto calls such assets dead capital. He says that dead capital exists where property systems do not allow conversion of assets into capital. Obstacles in converting assets into capital are legal, administrative and political.
A property system that facilitates conversion of assets into capital and therefore means of production has three levels. The first level is the asset itself like land or machinery. The second level is a representation of that asset in the form of a title, for example a title deed. The third level is a structure, a network of merchants where the representation, the title can be exchanged. The main value of a property system is that it makes the property representation lead a parallel and independent life to the actual asset. The title can be used to secure credit, it can be pledged without interfering with the asset itself. By using the title, the asset becomes capital or means of production. In advanced property systems representations are created out of titles, leading to higher levels of creating capital. This can go to a number of levels. For example a mortgage, a mortgage backed security, a Real Estate Investment Trust, REIT, and fartherinto financial derivatives. At every level the representations lead new lives and create new capital. The title, the mortgage and the mortgage backed security lead independent lives and produce capital at each stage. Where property systems are not well developed, people may have very valuable assets but those assets are dead capital because they may not be titled or there are no networks to use these titles to make the titles create capital.
With Nyeri having very many valuable assets, how can Nyeri convert those assets into capital to drive urbanization, industrialization. Nyeri exists under current Kenya law and administration. Any titles and any exchanges have to conform to the Kenyan law. The Kenyan property system is not well developed beyond the title and the mortgage. Kenya needs to go beyond the mortgage to derivatives and provide the network structure where these representations can move. Before Kenya develops such a property system, those who want to put their assets to best use must create their systems within existing Kenyan law. CRM will look at the assets and device titles and systems for maximizing capital generation from the assets. The resources that go into starting the businesses will be titled, used as collateral and traded.
Following on De Soto's convincing explanation, to make Nyeri assets/resources lead a pararel life requires two complimentary approaches. The first one is to create representations. The second is to create the networks where those representations can move around, exchanged to lead a life independent of the assets themselves. The two approaches will constitute two departments of CRM. CRM is also considering promoting the creation of basic assets that can be represented to generate capital for development. This would be a third department.
Using De Soto's ideas it is clear that many of the assets that locals hold is dead capital. Using the same ideas, CRM plans to workout ways to turn those assets into capital that can be used to urbanize, industrialize Nyeri. The obstacles that stop assets from being turned into capital will apply while applied to Nyeri assets. These are the problems of creating fungible representations of the assets. The law is cumbersome and there are no structures where such assets representations can be “fungled”. CRM plans to seek assistance in creating instruments, using existing laws, to serve as asset representations. CRM also plans to be a platform where those instruments can be traded and exchanged.