In a surprising twist within
This departure from conventional practices has ignited concerns, sparking fears about its potential repercussions for borrowers and those who stand as guarantors.
Financial Expert Nazir Jinnah on Monday said traditionally, guarantors played a secondary role, intervening only when the primary borrower defaulted.
''This approach was considered a last resort, with banks exhausting all options with the borrower before turning to the guarantor,'' Jinnah pointed out in a statement.
''A discernible change is underway, with reports indicating that certain Kenyan banks are actively pursuing guarantors, even when primary borrowers possess the financial means to repay.''
For example, he pointed out the case of
He said that
The bank has since put
It is one of the few private projects granted the Vision 2030 Private Sector Flagship status.
This shift, Nazir Jinnah said raises questions about the underlying motives and the potential consequences for both borrowers and guarantors.
He cautioned that the new shift towards guarantors could erode trust between banks and primary borrowers, who may feel unfairly targeted, especially if they have the means to meet their obligations.
Going forward, he said prospective guarantors, ''may become more cautious, knowing that banks might swiftly turn to them in case of default. This could impact the willingness of individuals to provide guarantees for loans.''
''Striking the right balance between risk mitigation and fair treatment of borrowers and guarantors is crucial for maintaining a healthy and sustainable banking environment.''
He added that, ''as this trend unfolds, stakeholders, including regulatory bodies, banks, borrowers, the
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