No one can deny the benefits of asset finance that give customers an opportunity to acquire moveable assets and repay in installments over a specified period of time. But with increased demand for financing comes an equivalent lending risk for banks and financial institutions through increased default rates.
How can a financial institutions balance out the equation? Yet asset finance has the potential to be the lead income earner for any bank?
According to Standard Newspaper Micro finance institutions which often loan against assets have also witnessed a growing number of defaults and have had to repossess and sell their clients vehicles. The economy has been battered over the last couple of years with the average five per cent growth being supported mainly by government spending even as the real economy struggles.
Banks have cut loans to guard against non-performing loans which have hit Sh230.6 billion as borrowers struggle to pay and in some cases are forced to surrender their hard-earned assets. The total industry’s gross loans and advances recorded a negative growth of 1.14 percent in quarter two of 2017 from Ksh2.38 trillion in quarter one of 2017 to Ksh 2.35 trillion in quarter two of 2017. Kenya Bankers Association.
This strain is what the Kenyan borrower shares with the country whose total stock of debt reached Sh4.412 trillion as of August, prompting global rating agencies to warn that the country may soon struggle to pay back its creditors, and as a result have put Kenya’s credit ratings on a downgrade review.
With a good risk management approach, banks can now increase their profitability and control the risks associated with asset finance. RiverCross fleet management solution is a perfect service mix that delivers a solution to these financial institutions’ dilemma of controlling risk and the growing default on payment.
The tracking services gives banks sustenance and assurance of payment from their clients.
With the system, the bank is now able to monitor which client got the car loan managing the risks involved with defaulter. Moreover fleet tracking services, increase bank’s competitiveness and growth in the lending sector.