Why Kenyans are moving away from using cars and households to get loans
By Kenneth Mwenda, September 22, 2025Kenyans are increasingly moving away from using household items and motor vehicles as collateral for loans, signalling a shift in borrowing trends.
Official data from the Business Registration Service (BRS) shows that the use of fridges, television sets, furniture, and motor vehicles as loan security fell sharply in the financial year ended June 30, 2025. The BRS data reveals that the total number of household items and vehicles used as collateral dropped by 14.4 per cent to 132,374 items.
Furniture such as sofa sets and chairs saw the steepest decline, falling 32.9 per cent to 16,680, while household appliances like fridges and televisions decreased by 19.5 per cent to 49,737. Motor vehicles also recorded a drop, albeit smaller, with 65,957 vehicles pledged as security, down 3.09 per cent from the previous year.
Banks tighten lending rules
This decline comes as banks reduce lending to individuals and households amid rising concerns over repayment defaults. The Central Bank of Kenya (CBK) reported that personal and household loans contracted to a three-year low of Ksh94.3 billion in 2024, compared with Ksh1.082 trillion in 2023.
The number of loan accounts in this category also fell by 1.42 million to 10.72 million, reflecting tighter lending conditions. Meanwhile, defaults rose to Ksh100.97 billion from Ksh92.03 billion, marking a clear warning to lenders and borrowers alike.
Interestingly, while traditional collateral like cars and household goods is declining, other types of assets are gaining popularity. The BRS notes a 53.6 percent increase in the use of livestock and securities such as shares and bonds as loan collateral.
The number of securities pledged more than doubled to 14,245, while livestock used for loans rose to 23,686. Livestock remains a particularly convenient option for borrowers in rural areas, where it is widely owned and easy for lenders to verify.
Experts say the decline in household and vehicle collateral reflects both economic pressures and changes in lending behaviour.
“Banks are cautious due to rising defaults. Borrowers also prefer using assets that are less critical for their day-to-day life,” Shigadi Mwakio, Deputy Registrar at the BRS said in May 2025.
High-value items such as cars may be difficult to repossess or sell quickly, especially when loan defaults occur, making them less attractive for both borrowers and lenders.
Loans reflect household realities
The shift also mirrors broader economic realities. Over the past five years, many Kenyan households have increasingly used loans to meet daily needs such as rent, food, school fees, and healthcare.
Rising inflation, slow wage growth, and reduced disposable income have prompted families to avoid pledging essential household items or vehicles. As a result, smaller, more liquid assets, or assets that can be easily replaced, are preferred for short-term borrowing.
The legal framework supporting movable collateral has, however, enabled a wider range of assets to be used for loans. Kenya’s Movable Property Security Rights (MPSR) Act of 2017 allows borrowers to pledge movable property while giving lenders confidence they can recover defaulted loans.
This law has made household items, livestock, and even intellectual property viable for credit. Lenders can register their rights through the MPSR registry, simplifying the process of verifying and reclaiming pledged assets.
Kenyans have already responded to the flexible framework. From July 2021 to April 2025, household items accounted for 291,099 pledged assets, surpassing motor vehicles, which had 243,280 registrations. Furniture and livestock followed with 117,778 and 85,416 items, respectively. Other movable assets such as stock trade shares, intellectual property, and crops have also been increasingly used.
Despite this growth, smaller banks remain cautious. Large banks appear more comfortable financing loans against household items and livestock because these assets are easier to verify and recover in case of default. Smaller banks fear potential losses if they cannot liquidate pledged items promptly.
To address this, the BRS continues to encourage banks to use the MPSR registry for financing cars, making vehicle loans more secure and formal. Currently, vehicles financed through banks are registered with the National Transport and Safety Authority (NTSA) as co-owned by lenders, ensuring legal protection.