Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
Use of cars and household items to secure loans from banks falls 14pc
Borrowers used 65,957 motor vehicles as collateral for loans in the period, which was a drop of 3.09 percent from the 68,060 that were used as security in the year ended June 2024.
Borrowers have reduced the use of household items such as furniture, fridges and televisions, and motor vehicles as collateral for loans, signaling lower uptake of the readily available low-value debt.
The use of fridges and televisions, motor vehicles, and furniture as collateral for loans dipped by 14.4 percent to a total of 132,374 items in the financial year ended June 30.
Official data from the Business Registration Services (BRS) shows that the use of furniture such as sofa sets and chairs as collateral for loans fell 32.9 percent to 16,680 in the year ended June 30, followed by a 19.5 percent drop in household items (like fridges and television sets) to 49,737.
Borrowers used 65,957 motor vehicles as collateral for loans in the period, which was a drop of 3.09 percent from the 68,060 that were used as security in the year ended June 2024.
BRS is the custodian of the Movable Property Security Rights (MPSR) registry, where banks list their rights over goods used by borrowers as security for loans.
Motor vehicles, fridges, television sets, and furniture have for years been the dominant type of collateral that individuals or small businesses use to secure loans in Kenya.
The drop in the use of the three types of collateral came at a time when banks cut lending to individuals and households amid increased fears of growing defaults.
Official data from the Central Bank of Kenya (CBK) shows that the value of personal and household loans contracted to a three-year low of Sh943.84 billion last year from Sh1.082 trillion in 2023 as the number of loan accounts in this category dropped by 1.42 million to 10.72 million.
The CBK data further shows that last year marked the first time that banks cut loans to individuals and households in seven years amid mounting repayment woes, as defaults from the sector rose to Sh100.97 billion from Sh92.03 billion in 2023.
The BRS disclosures, however, show that use of livestock and securities (such as bonds and shares) to secure loans jumped to a combined 37,931 in the review period, or a 53.6 percent rise from 24,694 a year earlier.
The number of shares and bonds used to secure loans more than doubled to 14,245 in the year ended June 30 from 6,234, while the number of livestock used increased to 23,686 from 18,460 in the same period.
Livestock remains one of the most popular assets for households in rural areas, making it a convenient type of security for short-term loans.
