A new report has detailed how cash-strapped Kenyans borrowed close to Sh26.8 billion in a span of fourth months.
According to the central bank of Kenya, borrowers used household goods, livestock, and office equipment as security.
The borrowing came following the reopening of the economy in July following the coronavirus pandemic.
The 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.
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.
The Sh26.8 billion was more than the Sh1.7 billion was worth of loans extended using movable securities during the lockdown period of April to March.
This surge in borrowing came in a period when more businesses resumed operations after the easing of some restrictions imposed to stem the spread of Covid-19.
Many small traders which had to close under coronavirus containment measures, turned to bank credits.
However, CBK notes that the banks remained 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.
