A rising number of clashes by Kenyan banks claiming rights over the same property marked for auction has turned the focus on due diligence practices by lenders before accepting such assets as collateral.
In the latest feud, Equity Bank and NCBA Bank are caught in a fierce fight for the sale of a property in downtown Nairobi, making NCBA to eventually auction the property to recover a loan of Sh160 million after a High Court ruling. This is the second case in which the two lenders are embroiled in a property fight.
Collateral is an asset that a lender accepts as security for extending a loan. If the borrower defaults, then the lender may seize the collateral. Accepting collateral against loans requires a lender to audit such assets for financial safety before entering into a proposed transaction with another party.