Data from the central bank of Kenya has unearthed the extend Kenyans can go to acquire loans following the effect of Covid-19 pandemic. The latest report revealed that Kenyans have been using movable items such as TV, Cows and furniture to borrow loans from financial institutions.
The Central Bank of Kenya (CBK) report show that from July to November 2020, individuals and businesses increased the use of personal assets to access credit compared to the previous quarter.
This trend in borrowing came in a period when more firms resumed operations after the easing of some restrictions imposed to stem the spread of Covid-19.
The Movable Property Security Rights Act 2017 has enabled banks to diversify collateral from the tradition of using immovable assets primarily land and buildings which are beyond the reach of most Kenyans.
“Most of them do not have land, and so they collateralise the assets such as office equipment, the computers and furniture that they have. This is what we are seeing today,” said Robert Nyamu, a partner at consulting firm Ernst & Young.
Business Daily has reported that banks have been hesitant to lend to the small businesses on the strength of their cash flow or rely on workers’ payslips to offer credit in an economic setting engulfed by layoffs and pay cuts.
The creation of registry under the movable property law, which allows lenders to track properties used for loans as well as lay claim to the assets has been greatly relayed on by banks to give out loans.
“The moveable assets register sort of brought into the pool additional possibilities for collateral beyond what was initially there (land and buildings as well as motor vehicles’ logbooks),” Kenya Bankers Association (KBA) chief executive Habil Olaka said earlier.
The CBK data shows that a third of the new loans of Sh84.6 billion issued by commercial banks between July and October used household goods, live animals and office equipment as collateral.
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