Why Owning Assets Still Matters More Than Your Income When Applying for a Loan

Banks are holding an estimated Sh5.7 trillion worth of assets as security against loans, according to data from Kenya’s largest lenders. That amount is about 1.5 times (Sh3.6 trillion) the value of the loans they have issued, showing that collateral remains at the centre of bank lending in Kenya.

What does this mean for the ordinary Kenyan?
For many Kenyans, access to credit is still heavily tied to ownership of assets such as land, buildings, vehicle logbooks or shares. Those without property often struggle to secure financing even when they have a steady income, healthy cash flow or a good repayment history. The figures also suggest that Kenya’s banking sector has yet to fully embrace cash flow based lending, where loan decisions are driven mainly by a borrower’s income, business performance and credit record rather than physical assets.

The gap is being filled by digital lenders like Tala and Branch,which rely on data analytics and algorithms to assess borrowers. Instead of demanding collateral, these firms analyse factors such as mobile money transactions and other digital financial behaviour to determine creditworthiness.

While collateral protects banks from losses when borrowers default, it can also expose families and businesses to the risk of losing valuable assets through auctions. The continued reliance on security by banks suggests that despite advances in credit information and digital lending, asset ownership remains one of the biggest determinants of who can access credit in Kenya.