Kenyans guaranteeing others loans, whether from banks or other lenders such as co-operative societies, have more recently found themselves in trouble – when the principal borrowers default and the lenders come calling.
Businessman Ngengi Muigai, Equity Bank chairman Munga and most currently Hugh Cholmondeley, the Naivasha-based settler, make the list of prominent personalities who have or still risk their property being auctioned after those they guaranteed loans failed.
Thousands of less prominent personalities are, however, is similar quandary, having been forced to shoulder the burden of paying loans that those they guaranteed have failed to pay.
Fact is that the magnitude and frequency with which guarantors are running into trouble requires deeper reflection. It may be resulting from the fact that many individuals do not fathom the full import of guaranteeing a loan before they sign on the dotted line.
Or that some creepy borrowers are deliberately procuring loans in the full knowledge that they will default and leave their guarantors with the burden of paying.
There appears to be a lacunae of information and legislation in the lending market that needs a quick response to save guarantors from themselves and to ensure the pain of defaulting on a loan is shared proportionately among borrowers and their guarantors in the event of a default.
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