The failure or inability to pay back loans is without a doubt one of the most distressing situations, especially for female defaulters. Some women borrow loans without informing their husbands and when they fail to meet their end of the bargain, auctioneers descend on family property. In most cases, this marks the beginning of the end of their marriages.
Some women have had to withdraw their membership from chamas and move to other towns when they fail to repay the loans.
The number of financial institutions that offer loans in the country have increased over the years, making it easier for individuals to borrow. Various groups and saccos assist their members to access loans, but unfortunately, they offer no assistance when the borrowers fall behind on repayment.
The prevailing economic conditions, rising cost of living, unemployment and lack of proper training in financial management are among the factors that lead borrowers to fail to meet their end of the bargain.
Samson Ochieng, an opinion leader who brings together development partners and financial experts to partner, collaborate, and support the community, tells Saturday Magazine that husbands play a significant role in the misuse of loans borrowed by their wives.
"Some married women have strained relationships with their husbands, and the situation often becomes worse after the woman receives money. In such cases, monies previously set aside to fund or boost a business may be diverted to other projects due to lack of cohesion between the man and his wife," he says.
These difficulties, Ochieng says, can cause the women to be in default. When that happens, the husbands often take a back seat, leaving their wives to face the music.
“In such instances, the women are forced to repay the borrowed amounts by themselves. Guarantors and chama or sacco group members begin piling pressure on such women to repay the loan. In the heat of things, the women may decide to disappear,” he observes.
According to Ochieng, women outperform men in borrowing and repaying loans, which is why most financial institutions target women. He believes that women entrepreneurs should be trained and informed on business skills to enable them make wiser decisions before and after borrowing.
According to a 2014 study on the long-term effects of debt on health titled Health Effects Of Indebtedness: A Systematic Review , those who are unable to pay their debts may experience long term health problems.
“Individuals with unmet loan payments had suicidal ideation and suffered from depression more often than those without such financial problems. Unpaid financial obligations were also related to poorer subjective health and health-related behaviours,” reads part of the report.
The report also shows that the level of health effects associated with not repaying loans is influenced by the source of debt, collateral status, repayment structure, and interest rates.
According to Francis Gwer, a financial expert with Financial Sector Deepening Kenya (FSD Kenya), auctioning properties has social, economic, and health consequences for loan defaulters because it risks impoverishing them, causing anguish and health challenges such as trauma. Furthermore, he says that auctioning properties can bring shame to the defaulters.
Gwer says that most default consequences are spelled out in the loan’s terms of agreement. However, he says that this does not limit the lender. If a borrower fails to repay the loan, a lender may pursue other legal remedies.
They can sue the defaulter or guarantor of the loan, exercise statutory power of sale against the property given as security, or restructure the terms of the loan so that the principal amount is increased, maturity period extended, or instalment amounts reduced to accommodate the borrower.
“Currently, the Land Act 2012 requires lenders to sell property at the highest possible market rate, and not lower than 75 per cent of the market value. This means that a valuation of the property must be carried out first before selling,” says Gwer.
He goes on to say that an auctioned property cannot be reclaimed by a defaulter, even if they eventually get enough money to pay off the debt.
“If there has been a default for more than one month, property auctions should be done legally by issuing three notices before an auction or sale of property occurs. During this time, a defaulter can reclaim their property before the auction or private sale occurs.”
Gwer adds that the law allows a borrower whose property is auctioned to challenge the auctioning process, especially if the auctioneer failed to provide a 45-day notice, or if the valuation was incorrect.
“Even then, it is important to note that courts aren’t likely to invalidate an auction if property has been bought by a third party. The party will only be compensated by way of money by the party of fault,” Here are stories of women who have previously found themselves in default.
I borrowed Sh100,000 about 10 years ago. I did not inform my husband. I was operating a successful food stall at the time. Because of my ability to repay, my loan limit increased over time. My chama was lending money to members based on their repayment history.
Upon receiving the Sh100,000, I founded a community school in Mukuru kwa Njenga. I had hoped that the school would attract many students and that through their school fees, I would repay the loan. However, this did not happen.
One day, the lenders came to my rental house and auctioned almost all my furniture and other household items. It was an embarrassing experience, and it became so difficult to explain what was happening to my husband since he was not even aware of my plans. He only found out about it when he returned to an empty home from work that evening.
I had a small kiosk where I sold perishable goods outside my home, and that is the only business my group members knew about. The value of that stall wasn’t equal to the amount I had borrowed, so the auction only served to pay part of the loan.
Needless to say, my relationship with my husband was ruined after the auction. He chased me away due to anger and frustration, and that is how our 12-year marriage ended. I also had to close the learning facility since it was not being profitable. Because I had no source of income and my reputation had been damaged, I decided to move out of Nairobi and into my parents' home to begin a new life.
I am 33 years old, a single mother of two based in Migori county. In 2020, I borrowed Sh100,000 to expand my second-hand clothes business. Soon after receiving the amount, one of my children became ill and got admitted, and I used part of the money to pay the hospital bill.
I could not run my business while I was nursing my child, which greatly impacted my earnings. All I had left was the unsold stock. Later, I failed to repay the amount as agreed. The lenders watched my every move and would call me frequently.
I didn’t have a guarantor so I requested a friend to help me out after I defaulted. He also ended up on the receiving end of the lender’s constant calls and threats and eventually, I decided to flee to Tanzania to escape my creditors who did not understand my reason for defaulting.
However, living illegally in a foreign country proved difficult, especially since I started a business there. That forced me to return to Migori, although I was unable to stay there for long. I have since resorted to moving from place to place because the lenders are still looking for me because of the pending loan.
I would really love to pay the arrears, but the lack of a stable source of income, the Covid-19 pandemic, and the rising cost of living have made it difficult for me to do so. I keep avoiding my former chama members because they may expose me to the lenders, who will auction off my remaining household properties.
I am a 36-year-old mother of five. I took a loan of Sh20,000 in December 2021. My two children were in high school, but I did not have enough money to cover their tuition. My husband, a driver, was unemployed at the time while I was a casual labourer earning Sh10,000 a month. I used my salary to pay the lender Sh1,000 weekly.
While my husband agreed to be my guarantor, he had no stable source of income. I then pledged my 5,000-litre water tank to secure another loan. That water tank was the most expensive property I had and it was very important to me just as it is to other women here in Machakos. During the rainy season, we use the tanks to store rain water for home use.
I used the entire loan to pay our two children's outstanding fees. Initially, I used to repay my loan on time, but when my balance was Sh10,000, I went into default for two weeks. It is at that time that I began receiving numerous phone calls from auctioneers. I tried looking for money from everywhere and anywhere and even requested my boss to give me a salary advance, but this was not sustainable.
The auctioneers went to my home and emptied the tank of water before taking it. They later sold it at Sh15 000. They explained that they used the extra money for their transport, and to cover the interest.
That was a very sad experience that still pains me. Since then, I have not found a tank of the same size for the Sh10, 000 which I owed the lenders at the time of the auction. I would have loved to have my water tank back, but the auctioneers asked me never to contact them again. It has been more than a year, but I am yet to recover.
