NCBA purchases yard for seized assets as Loan defaults increase
Denis Gitau  |  Jul 8, 2020

With the number of loan defaulters on the rise, NCBA Group has had to acquire a yard to store repossessed cars as Kenya’s economy continues to struggle.

NCBA which was formed last year after a merger between the NIC group and CBA group,  said in the latest annual report that the yard has helped in facilitating the maintenance of the vehicles on auction and they are now selling them at better prices.

This is a step away from the norm of taking repossessed cars directly to auctioneers for public sale.

The current state of the economy has seen aggressive lenders seize the assets of a growing number of distressed borrowers

NCBA assets finance division is mainly in charge of handling car loans.

The use of the yard has enabled the bank to enjoy a 15% increase in the selling price of repossessed automobiles as well as a faster turnaround in disposing of them.

This is seeing as they can carry out basic maintenance activities on the cars.

The group has however not disclosed the amount paid for the yard. This as the number of vehicles in auctioneers’ yards continues to grow despite reduced sales.

According to the bank, it has financed well over 4,300 vehicles worth roughly Sh17 billion. Over 80 percent of these are commercial vehicles for use by small and medium-sized enterprises.

The steadily increasing defaults are a clear reflection of the tough times that loan holders are going through in an economy that has seen many lose their jobs and led to the closure of several businesses.

Many lenders are struggling to unload properties seized from defaulters, as potential buyers are unwilling to pay above the minimum bid price stipulated in the law.

With buyers typically seeking to purchase auctioned properties at the lowest cost possible, few takers can match reserved bid prices. 

This is thanks to the Land Act 2012 that prevents banks from selling seized assets at less than 75% of their current market value.

Repeat advertisements for auctions have resulted from delays in the fall of the auctioneer’s hammer even as the properties continue to suffer a loss of value.

Among NCBA’s listed priority growth areas is asset financing, a business that was popular with NIC before the merger.

The lender also introduced an online hire purchase application platform last year. According to NCBA, about 56% of applications originate from there.

The internet-based platform offers a seamless automated process for loan applications to enable its clients to use their personal computers or phones to apply for loans as opposed to visiting a branch.