Household items are the most commonly used moveable assets by individuals to secure short-term loans from lenders in Kenya.
Other movable properties that is securitisable include motor vehicles, furniture, office equipment and livestock.
Available records, published in the Shared Value Report 2019 by the Kenya Bankers Association (KBA), indicate that as at May 2017, there were 198, 873 loans given out by KCB, KWFT and Co-operative Bank, using household items as collateral.
This was followed by 86,010 loans by NIC, Equity, KCB, CBA and Platinum Credit, using motor vehicle as collateral.
The drive to use moveable assets as collateral for bank loans comes in the wake of concerns that lenders have ignored these items, closing up the credit market to the mostly small and medium-sized enterprises and individuals.
In a report by Financial Sector Deepening, as of the end of January 2019, there were 183,487 loans registered on the Moveable Assets Registry worth KSh 3.65 trillion (USD 36.5 billion) and more than 13,000 searches were conducted since the launch of the registry in May 2017.
Borrowers register their collateral at the eCitizen online platform, where the first registry of its kind in East Africa was recently set up. The banks use the collateral registry to determine the risk profile and subsequent facility for which the client qualifies.
The registry is a departure from the tradition of using immovable assets – primarily land and buildings – that are beyond the reach of most Kenyans.
The Movable Property Security Rights Act, 2017 is aimed at enabling banks lend to individuals and SMEs with assets such as household goods, livestock and unsold stock. The Act also accommodates individuals working in the creative industry who can value their assets and obtain facilities against them.
At present, an artist can demonstrate to a bank that they have performance contracts lined up and are thus assured of cash flow to enable them to service the facility they seek.
“The diversity of assets registered on the eCitizen platform demonstrates the immense potential of this innovative system which is sure to transform how Kenyans borrow,” said the KBA report.
It is worth noting that non-bank lenders are also utilizing the registry to extend credit to individuals and enterprises.