Jared Kinyua took a loan to buy a lorry to supply concrete when he got tenders from the Kiambu county in 2014, thanks to the Access to Government Procurement Opportunities (AGPO) initiative
What the third year student at Kenyatta University considered economic freedom has now left a bitter taste in his mouth after the county delayed payments for two years. This has seen him default on the loan, losing both the lorry and other property to auctioneers.
Kinyua is just one of thousands of Kenyans whose properties are being repossessed by lenders after failing to service their loans due to the current tough economic conditions in the country, worsened by the tense political situation.
The Star has noticed a sudden increase in the number of auction adverts in local papers, most of them by local financial institutions, targeting mostly commercial vehicles.
According to John Njue, the chief executive at Vision Root Auctioneers, they now conduct at least two auctions per week, up from two per month last year, to recover especially vehicles from loan defaulters on behalf of financial institutions.
‘’Most of these defaulters took loan facilities to supply to county governments which are now dodging them on payments. I pity them, because lenders are also caught in the harsh economic situation in the country. We are left with no option but to repossess property,” said Njue.
He added that auctioneers are encountering minimal resistance from borrowers who go to court to protect their property with the majority of them hopelessly surrendering to avoid additional costs.
Kenya Auction, an auction-listing and advertising platform, is now placing 300 auctions every month this year, up from 100 the past three years.
Speaking to the Star on the phone, Isaack Mutiso from Kenya Auction said the number of auctions is likely to increase up to the end of the year if the current political bickering persists. ‘’The liquidity pressure is forcing the government to cut on expenditure, delay LPOs and even salaries for both national and county workers. Other factors like drought and the interest capping law have forced some firms to close, hence unemployment,’’ said Mutiso.
It is no wonder that non-performing loans in Kenya’s banking sector rose to close to 10 per cent in the second quarter of the year, as credit to key sectors such as trade, agriculture and real estate dropped.
Alex Kibet, managing director at Eagle Eye Auctioneers in Eldoret, said the problem is cutting across economic pyramids in the country.
‘’Even households are struggling to pay rent, forcing landlords to auction their property,” Kibet said.