The Central Bank of Kenya (CBK) and the Kenya Bankers Association (KBA) are jointly developing an electronic collateral registry to make it easier for borrowers to move secured loans between banks.
CBK Governor Kamau Thugge told the National Assembly’s Finance and Planning Committee that the proposed system would allow borrowers to transfer collateral with fewer administrative and legal costs and described the process as “almost costless”.
Under the electronic arrangement, a borrower who finds more favourable lending terms at another institution would be able to shift the collateral attached to the existing facility without engaging multiple lawyers or completing lengthy procedures.
The initiative forms part of CBK’s broader effort to strengthen competition in the banking sector and complements the risk-based credit pricing framework that requires lenders to assess individual borrower risk when setting loan prices.
By reducing the financial and administrative burden of moving collateral, the registry aims to give borrowers greater flexibility when comparing loan offers, especially where security is pledged against property or other assets.
Thugge linked the registry to transparency measures, arguing that borrowers should be able to approach another lender without incurring significant switching costs if they believe their risk assessment is incorrect.
The governor said that facilitating easier collateral transfers could encourage banks to compete more actively for customers, potentially leading to sustainable reductions in lending rates and a more responsive banking market.
