Loans against TVs and furniture up 42pc
The number of loans issued against movable assets such as household items, crops, livestock, and bank accounts increased by 42 per cent in the 10 months to June.
The number of notifications by lenders for credit issued against movable assets such as motor vehicles, livestock, and furniture has risen 42 per cent in the first 10 months of the current fiscal year as the effects of the current economic squeeze persisted.
Individuals and businesses are braving a high cost of living and tough operating environment, and to unlock liquidity, they are releasing their movable assets such as motor vehicles, crops, machinery, livestock, business inventory, electronics, and furniture to secure loans.
Statistics from the Business Registration Service (BRS) show Movable Property Security Rights (MPSR) initial notices increased by 40,419 between July and April to hit 136,921, up from 96,502 notices that were filed in the previous year.
Further, the initial notices filed during the first 10 months of the current financial year have already surpassed the total notices filed during the entire 2021/22 financial year which totaled 118,157.
This marks the third year in a row that the number of these initial notices has increased, having dropped sharply in the financial year 2019/20 due to the Covid-19 pandemic that saw banks and other financiers reduce lending.
Kenya enacted the Movable Property Security Rights Act in 2017 which provides a legal framework that governs use of movable property as collateral which led to the establishment of the register in May 2017 to replace the chattels registry.
This has enabled borrowers to now use such assets as security for loans, while lenders have gained more confidence to lend to such borrowers as such property would cover their outstanding loans in case of default.
Banks have also accelerated lending to the private sector and cut their investment in government securities amid concern that the State has accumulated too much debt at high-interest rates which could threaten its ability to repay.
In 2022, lending by banks to the private sector increased by 57 per cent to Sh380.3 billion up from Sh241.9 billion in 2021, according to data from the Central Bank of Kenya (CBK).
In contrast, the data shows that lenders put only Sh196.2 billion in Treasury Bills and bonds last year compared with Sh326.4 billion in 2021, translating to a 40 per cent decline in banks’ investment in government securities.
