Revaluing collateral
Collateral is only useful as security while its recorded value reflects reality. A vehicle depreciates, land appreciates, equipment wears — so a value captured at origination drifts over the life of the loan. Revaluation is the formal workflow that refreshes that figure, and because provisioning is calculated net of security, a changed value can move a loan's risk position.
Why revalue at all
A collateral register that is just a list of values captured once stops being trustworthy the moment those values go stale. Revaluation treats collateral as something to actively govern rather than record and forget — you re-assess the asset and update the register through a formal workflow, leaving the prior value visible rather than silently overwritten.
When revaluation is required
- On a periodic cadence, so long-tenor secured loans do not run on origination-era values.
- When the asset class is volatile enough that its value could have moved materially since it was last assessed.
- Ahead of a decision that depends on current security — for example before relying on the collateral in a recovery or provisioning context.
How a revaluation affects risk classification
Provisioning in Ustawi is calculated net of collateral/security value. Because of that, the recorded value of the security feeds directly into how much provision a loan carries: if a revaluation lowers the assessed value, the unsecured portion of the exposure rises, and the provision required against the loan can rise with it. Revaluing upward can have the opposite effect. This is why revaluation is a governed step, not a quiet edit — it changes a figure that regulatory provisioning depends on.
A loan's BOT classification band is driven by how far past due it is, not by its collateral value. Revaluation changes the security applied against that classification when provisioning is computed — it does not, by itself, move a current loan into a worse band.