Kenyan borrowers could soon find it easier and cheaper to transfer existing loans from one bank to another under a proposed electronic collateral-transfer system. The initiative is being developed by the Central Bank of Kenya (CBK) in partnership with the Kenya Bankers Association (KBA) to increase competition among lenders.
CBK Governor Kamau Thugge told lawmakers that the current process of transferring assets pledged as loan security involves legal and administrative procedures. These requirements often discourage borrowers from moving to banks offering more favourable lending rates.
Thugge said the proposed system could make transferring loan security between banks almost costless. This is expected to strengthen competition among lenders as they seek to attract customers through better loan terms.
Kenya already has an electronic Movable Property Security Rights Registry operated through the Business Registration Service. Established in 2017, the registry records lenders’ claims over movable assets used as loan security.
However, the proposed initiative is expected to improve how collateral is transferred between lenders. This will include situations involving property titles and other security records.
CBK has not announced when the system will be launched or disclosed its implementation costs. It has also not specified the fees borrowers may be required to pay when transferring their loan security.
However, the proposed initiative is expected to improve how collateral is transferred between lenders. This will include situations involving property titles and other security records.
CBK has not announced when the system will be launched or disclosed its implementation costs. It has also not specified the fees borrowers may be required to pay when transferring their loan security.
Although lower administrative costs could encourage more borrowers to refinance their loans, approval will still depend on individual banks. Borrowers will need to find lenders willing to approve their applications and offer sufficiently better terms.