It is the new desperation economy. As traditional banks tighten their belts and mobile loans offer peanuts, thousands of Kenyans are turning to "logbook loans" to survive. But this alternative lifeline is quickly becoming a noose for many vehicle owners.

Firms like Roots Credit and MOGO are recording a boom in business, offering quick cash—up to 80% of a car's value—processed in under 24 hours. The pitch is seductive: "Keep driving your car while you get the cash." For a cash-strapped entrepreneur or a family facing a medical emergency, it sounds like a miracle. But the fine print tells a different story of high interest rates and aggressive recovery tactics.

Fast Cash, Fast Crash

The "logbook loan" model is simple but brutal. You hand over your ownership documents (the logbook) as collateral. If you default, the lender doesn't just call you; they come for the car. The surge in these loans reflects a banking sector that has failed the common man, leaving the gap wide open for micro-lenders to exploit. While companies like NCBA offer structured logbook products, the unregulated market is the Wild West.

Borrowers are often hit with a barrage of hidden costs: valuation fees, tracking device installation, insurance fees, and "processing" charges that eat into the loan amount before it even hits their M-Pesa. "I borrowed Sh200,000 but ended up paying back nearly double in a year," said one Nairobi taxi driver who requested anonymity. "It is slavery."

• The Eligibility Trap: Lenders accept old cars (up to 15 years), widening the net to capture the lower middle class who rely on older vehicles for their livelihood.
• The Auctioneer’s Hammer: The Nairobi auction yards are filling up with vehicles seized from defaulters, a graveyard of dreams for those who thought they could beat the rates.
• The Stability Myth: The Central Bank insists the banking sector is stable, yet the flight to these high-risk loans suggests a credit crunch in the mainstream economy.

A Necessary Evil?

Despite the risks, the sector is growing because it meets a need. Banks are too slow; mobile loans are too small. Logbook lenders sit in the sweet spot of "emergency liquidity." For the SME owner needing stock today, the high interest is the price of doing business.

However, financial experts warn that this is a bubble fueled by distress. When you mortgage your primary asset—often your tool of trade—to pay for consumption, you are one missed payment away from poverty. The logbook loan may be a lifeline, but for many Kenyans, it is one that pulls them under.