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Top Regional Bank Buys Yard For Seized Cars As Loan Defaults Rise

NCBA Group with banking operations across the East African region has acquired a yard for storing cars repossessed from loan defaulters, pointing to a rise in asset seizures in Kenya’s struggling economy.

The group, which was formed last year following the merger between CBA group and NIC group, says in latest annual report that the yard has helped it maintain the vehicles and sell them at a better price.

This represents a departure from the common practice by banks where repossessed vehicles are taken directly to auctioneers’ yards for public sale.

Sluggish economic activity has created a growing pool of distressed borrowers who are increasingly seeing their assets being seized by aggressive lenders.

NCBA assets finance division deals mainly with cars loans.

 “This has seen a 15 percent increase in the selling price of repossessed vehicles and faster turnaround in their disposal as we are now able to conduct basic maintenance like regular cleaning of vehicles and ensuring proper tyre pressure to restore their value,” said the bank.

NCBA has not disclosed how much it spent on the yard, which comes at a time many auctioneers are recording increased vehicles in their yards amid reduced sales.

The lender says it has financed over 4,300 vehicles worth around Sh17 billion, with over 80 percent of them being for commercial use by small and medium-sized enterprises.

The mounting defaults are a reflection of the struggles that loan holders are undergoing in an economy that has witnessed a string of job losses and closure of small business in the face of Covid-19.

Many commercial banks are struggling to auction properties seized from loan defaulters with potential buyers hesitating to pay above the minimum bid price set in law.

Buyers are increasingly seeking to buy auction properties such as vehicles cheaply and at outsized discounts but their prices have not been possible due to the Land Act 2012.

The Act bars banks from auctioning seized assets at below 75 percent of the prevailing market value, leading to few takers with offers that match reserved bid prices.

The delayed fall of auctioneer hammer has prompted repeat advertisements for auctions even the targeted properties suffer diminished value.

NCBA has listed asset financing as among the priority growth areas, continuing the business that was popular with NIC group before the merger.

The group last year also implemented and online platform for hire purchase applications, which it says has led to about 56 percent of the applications originate from the platform.

The online platform provides an automated loan application process that allows customers to apply for loans through their computer or mobile devices without having to visit a branch.

-Business Daily

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