Collateralization of Intellectual Property Rights in Ethiopia: An Examination of Legal, Policy and Institutional Frameworks

Abstract

Utilization of intellectual property rights (IPRs) as loan collateral has emerged as a unique business and financing tool that offers opportunity for alternative financing to the traditional financing system that solely uses tangible properties as collateral. Ethiopia has put in place the legal framework for utilization of properties as collateral. The laws recognize and regulate the use of both tangible and intangible properties as collateral to obtain financing. In practice, financial institutions in the country only advance loans to persons having tangible assets that can be used as collateral. Hence, IPRs are not yet utilized as loan collateral in Ethiopia though they are legally recognized and protected asset class in the country. As a legally recognized and protected property, IPRs should be able to function as loan collateral. Recently, Ethiopia has undertaken reforms that support the realization of this idea and has enacted a new secured transaction law. However, it is understood that IPRs collateralization goes beyond the sphere of secured transaction law. It demands a number of other laws and factors to explore. The objective of this paper is to examine whether IPRs can be utilized as collateral in Ethiopia by critically investigating the existing Ethiopia’s legal, policy and institutional frameworks, and explore the main difficulties that may hinder it from becoming a successful financing tool. To address the objective, the study employed doctrinal research methodology and analyzed pertinent laws, policies and scholarly literatures. The paper finds that IPRs are not utilized as loan collateral in Ethiopia not only because its benefits are not understood in the country, but also because the government has not put in place adequate policy, legal and institutional frameworks. It also shows that there are multiple practical challenges that impede the use of IPRs as collateral in the country. Therefore, this study recommends reforms in the pertinent policy, legal and institutional frameworks for the use of IPRs as of collateral Ethiopia.