Auctioneers’ paradise as families and businesses default on loans

Auctioneers ready to tow a vehicle belonging to a client who failed to pay up debt /FILE

Pawning or auctioning luxury items was for years the last resort for Kenyans caught in temporary financial distress. Jewelry, electronics and high-end furniture often ended up at the stores of shylocks and auctioneers, only to be reclaimed when fortunes improved.

But, today, a new and troubling reality is taking root. A growing number of Kenyans are being forced to auction off their basic household essentials — beds, seats and even kitchen units in a desperate attempt to make ends meet.

Landlords, shylocks, microcredit entities, Saccos and banks are having a field day, employing aggressive recovery tactics as borrowers, tenants and businesses fall behind on their loan obligations.

As borrowers lose assets to the hammer, auctioneers on the other hand are struggling to sell items due to the shrinking disposable income.

Kenya’s Gross National Disposable Income has been dropping, hitting Sh36,800 per month by end of last financial year compared to Sh41,000 in the previous year.  Observers see it plunging further to Sh30,000.

A spot check across auction businesses in Nairobi’s estates and satellite towns revealed heaps of confiscated furniture, electronics, and vehicles among others.

High-end borrowers have lost valuable assets like land, buildings, their businesses and even more.

In estates such as Kayole, Umoja, Pipeline and Rongai, makeshift auction yards now display stripped-down household items: worn mattresses, single beds, and three-seater sofas lined up for buyers seeking bargains.

The sight has become so common that residents hardly stop to stare anymore.

“We used to see people bringing in luxury sofas, flat-screen TVs and home theatre appliances. Now, it’s mostly beds and dining sets. People are just bringing anything they can,” Thomas Mwendwa, a small auctioneer in Tassia, Nairobi, said.

Kenya’s economy is reported to be growing at an average of five per cent annually, a rate that in theory should lift households out of poverty. Yet, for many Kenyans, this growth remains a statistical mirage, failing to translate into improved living standards.

Gym instructor,Jacob Mangeli was forced to give up his furniture and other house equipment to auctioneers to offset defaulted rent.

“It is tough paying school fees, buying food and meeting other bills in an era where salaries are delaying. I had to sell off my goods to offset a seven months’ rent arrears in South B where I have stayed for more than 20 years.”

It is the same case for Nelson Kihima, a former local NGO boss, who is currently jobless due to erratic donor funding.

“I have consumed all savings on domestic expenditure. I have borrowed from almost all digital lenders. My credit profile is in tatters. I had to relocate to Marurui after I defaulted on my mortgage”.  

The Kenya Alliance of Resident Associations, the apex body representing resident associations in the country, has termed the situation “alarming”.

Chief executive Henry Ochieng'  said cases of individuals being auctioned due to rent arrears have increased.

“The distress calls are real. Landlords are auctioning people and this cuts across the high-end, middle income and low-end of the society mainly in urban areas where the majority live in rented houses. “

He adds that some households have been forced to make adjustments such as moving to cheaper areas in terms of rent and cut expenses to survive.

A high number of individuals are struggling to meet their mortgage obligations and are forced to sell off-property at throwaway prices.

“Even so, buyers are not coming by. Auctioneers are stuck with these properties including cars and household goods because disposable income has shrunk… so the ripple effect is huge,” he said.

The law prohibits the forced sale of charged property at less than 75 per cent of its market value, as stipulated in Section 97 of the Land Act, 2012.

This provision ensures lenders act with a duty of care, preventing the sale of repossessed assets at excessively low prices. If a sale falls below this threshold, the borrower can legally seek to have the sale declared void. 

A Sacco official who spoke to the Star noted that selling properties such as land and cars is a challenge as buyers are scarce, amid continued recovery on defaulted loans.

The Sacco Societies Regulatory Authority data shows the proportion of loans under the loss category, implying that the same had not been repaid for a period of over one year or more, increased sharply from 3.38 per cent of the gross loans in 2022 to a proportion of 4.79 per cent of the gross loans in 2023.

The increase of loans under the loss category means that a large number of loan accounts previously classified as either substandard or doubtful, deteriorated to the loss category with the amount involved increasing from Sh22.98 billion in 2022 to Sh36.35 billion in 2023.

“The default rate is alarming. During Covid-19 it was understandable and people got their loans restructured but we are off Covid-19 by several years and the trend is till the same. Loan loss provisions are going up,” a Sasra official, who sought anonymity, told the Star.

Loan loss provisions are funds set aside by financial institutions to cover potential losses from defaulted loans. These provisions act as a financial buffer, ensuring that banks can absorb losses without severely impacting their overall financial stability.

“Saccos must put in place adequate loan recovery measures in order to improve the quality of their loan portfolio,” the regulator says in a sector report.

The impact of defaulted loans is huge where Saccos have themselves defaulted to their lenders and their assets are at risk of auction.

Guarantors are also forced to pay, putting many under duress as Saccos seek to recover defaulted loans.

With the high default rate, Saccos are also forced to cut on dividends, which has seen members earn less.

The latest data from Sasra shows 58 Saccos face potential asset auctions after defaulting on loans totaling Sh1.36 billion from the Kenya Union of Savings and Credit Cooperatives.

Earlier in the year, a forensic report revealed embezzlement of more than Sh12.5 billion at Kuscco, unlikely to be recovered.

The hospitality sector has also faced significant challenges, including rising non-performing loans, intense competition from short-term rentals, and a slow recovery following the pandemic.

As a result, banks have increasingly turned to receivership to recover debts, particularly targeting mid-tier establishments, including three- and four-star hotels.

Since January 2025, at least three key hotels have been seized or placed under receivership due to unpaid loans.

Equity Bank placed Eastland Hotel, a popular four-star hotel located in Kilimani area in Nairobi, under receivership due to an undisclosed debt effective September 9, 2025.

The National Bank of Kenya placed the Nairobi Upper Hill Hotel under receivership on August 18, 2025.

The hotel owned by businessman Geoffrey Muotia reportedly owes National Bank about Sh447 million from loans dating back to 2014.

Another facility is Nyakoe Hotel in Kisii, which was also placed under receivership by NBK during the same month.

The aggressive recovery by financial institutions due to rising non-performing loans, which clocked an average 20-year high of 17.7 per cent, has also seen several companies, including East Africa Cables, placed under receivership, with a few others liquidated in totality.

The Business Registration Service records show that between July 2024 and June 2025 some 15 firms went into direct administration, while nine were placed under administrative receivership.

The latest financial stability report by the Central Bank of Kenya shows that banks cut loan write-offs by a whopping Sh26 billion to Sh7 billion in the last financial year, opting for aggressive recovery.

According to the report, lenders slashed loan write-offs by 79 per cent in 2024, from Sh33.3 billion.

The shift triggered a rise in auctions, liquidations, and receiverships, squeezing borrowers as lenders tightened credit.

Recoveries rose to Sh5.2 billion, easing bad debt provisions and boosting pre-tax earnings by 19 per cent to Sh260.3 billion.

Top lenders like KCB, Co-op Bank, and NCBA cut impairment charges, freeing cash and defending margins. But, with few buyers meeting the 75 per cent market value rule, distressed assets are piling up.

Apart from slashing write-offs, local banks also cut lending to individuals and households for the first time in seven years as high interest rates and rising defaults squeezed borrowers and lenders alike.

Personal and household loans fell by Sh138 billion to Sh943.84 billion in 2024, with loan accounts dropping by 1.42 million to 10.72 million after a 1.55 million decline in 2023.

This segment, which represents 92.6 per cent of all loan accounts, was the only one to contract as agriculture, manufacturing, real estate, and trade grew.

The Kenya Bankers Association links the pullback to a jump in non-performing loans and a pivot to secured credit.

Personal NPLs rose to Sh100.97 billion, or 10.7 per cent of the book, from 8.5 per cent, amid a CBR that reached 13 per cent and average lending costs that climbed to 17.2 per cent, with some rates as high as 25 per cent.

Household cash flows were further strained by new statutory deductions, pushing many below the one-third take-home threshold.