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Fridges and TVs surpass cars as bank loan collateral
Kenya enacted the Movable Property Security Rights Act in 2017, which provided a legal framework that governs the use of movable property as collateral.
Household goods such as television sets and fridges have surpassed motor vehicles as collateral for short-term bank loans, signalling increased economic hardship for families in Kenya’s soft economy.
The Business Registration Service (BRS) has revealed that 291,099 pieces of household items have been used to secure loans since July 2021, which is more than any other type of movable property.
The BRS, formerly known as the Office of Registrar of Companies, is the custodian of the Movable Property Security Rights (MPSR) registry, through which creditors such as banks list their rights over goods used by borrowers as loan securities.
Household items are increasingly being used as collateral to secure low-value loans because they are readily available, and for creditors, these items can easily be auctioned to recover defaulted loans.
Motor vehicles were the second-most used movable assets that borrowers used to secure loans, with creditors registering over 243,280 vehicles during the period, or post-Covid pandemic.
“Lenders don’t have a problem with accepting household items because you will find they have receipts on big-ticket items such as television sets and fridges. They are movable and the lenders know where they can find them,” said Shigadi Mwakio, the Deputy Registrar of MPSR, in an interview with the Business Daily last week.
Furniture and livestock were also heavily used for borrowing, with 117,778 pieces and 85,416 heads, respectively, used to secure loans during the period. Equipment (79,179) closed the top five most collateralised movable assets.
The increased use of these goods comes in a period when separate surveys indicate that more households are tapping loans to meet their daily needs such as food, health and rent costs. It emerges in a period when workers' pay increases have, for the fifth year in a row, lagged behind inflation, narrowing households’ disposable income.
Last year, for instance, the Kenyan economy added the fewest jobs since the 2020 Covid pandemic as growth slowed, dealing a blow to President William Ruto administration’s efforts to ease the mounting youth unemployment.
About 782,300 new jobs were created last year, down from 848,100 a year earlier, data released by the Kenya National Bureau of Statistics (KNBS) showed.
This emerged in a year when the economy also expanded at the slowest pace since the Covid pandemic at 4.7 percent compared to 5.7 percent a year earlier because of costly credit, floods that destroyed farms and disruptions following the deadly protests against the Finance Bill.
Salaried workers continued to feel the pinch of a slowing economy as real wages - gross salaries after accounting for inflation - fell for a fifth straight year, hurting employees' disposable income.
Kenya enacted the Movable Property Security Rights Act in 2017, which provided a legal framework that governs the use of movable property as collateral.
This has enabled borrowers to now use such assets to secure loans, while lenders have gained more confidence to lend to such borrowers as such assets would cover their outstanding loans in case of default.
The increased demand for loans, as well as the growth in the formalisation of collateral use, has seen more creditors join the market. “It’s a register for lenders, and by lenders that include shylocks. We do not lock anyone out, it could even be individuals acting as lenders,” said Ms Mwakio.
Other top movable assets that were charged against loans are stock trade (32,150), securities (21,466), acquired property (20,622), inventory (9,466) and crops (3,261). The list also includes intellectual property (1,346) and consumer goods (584).
Over the past five years, most of the loans taken by households in Kenya have been spent on food, school fees, rent and other subsistence needs, in a departure from the past when loans were mainly used in investments and purchase of assets such as houses, land and motor vehicles.
Lenders can lodge the notice of priority over movable property with the MPSR, while the credit issuers can also conduct searches to ascertain whether the assets are currently used to secure credit.
MPSR’s initial notices between July 2021 and April 2025 totalled 626,575, while searches done over the same period were 116,671.
Large banks are deemed to be more comfortable lending against movable properties than their smaller peers, who fret over concerns about the recovery of the collateral.
“The big banks are comfortable with lending against movable property such as household items and livestock, but the small ones are still hesitant,” Ms Mwakio said.
The BRS seeks to lobby banks to use MPRS for the financing of new cars, and have the vehicles listed in the movable property platform. Presently, banks fund the purchase of cars under asset financing, where they register the vehicles at the National Transport and Safety Authority (NTSA) as co-owners.
