Kenyans borrow Sh15 billion monthly as financial woes deepen - report
The report highlights that most borrowers seek these loans for survival rather than investment.
A growing number of Kenyans are turning to digital lenders for financial relief, borrowing an estimated Sh500 million daily, a new report by the Digital Financial Services Association of Kenya (DFSAK) has revealed.
The report indicates that this borrowing trend translates to Sh15 billion monthly, with approximately 16 percent of the population, more than eight million Kenyans, taking loans from digital platforms each month.
The need for collateral to secure loans from traditional banks has driven many borrowers to digital lenders, particularly in the boda boda sector, where nearly all riders rely on non-deposit-taking credit providers.
DFSAK chairman Kevin Mutiso emphasized the role of digital lending in supporting economic growth and poverty alleviation.
However, the report highlights that most borrowers seek these loans for survival rather than investment.
“A significant majority of consumers reported that the increased cost of living was the primary reason for their financial challenges. This challenge was further compounded by expenses being higher than income,” the report states.
According to the findings, the financial strain in 2024 has resulted in delayed incomes, job losses, business closures, and mounting loan burdens.
Despite this, 75 percent of respondents expressed optimism about their financial future. However, only 26 percent reported an increase in income over the past six months, suggesting that many are struggling to manage immediate financial needs.
To cope with economic hardships, 55 percent of those facing rising expenses have been cutting back on non-essential spending.
Additionally, loan collection practices have become a key factor in selecting digital lenders, with borrowers prioritizing fair collection methods alongside interest rates, repayment terms, and loan processing times.
DFSAK also noted the role of digital lenders in expanding access to technology, stating that by financing an average of 100,000 smartphones per month, they are increasing internet accessibility and digital participation.
“This growing access to digital platforms is expected to play a crucial role in bridging financial gaps and expanding economic opportunities for many Kenyans,” said Mutiso.
The association welcomed the implementation of the Business Laws (Amendment) Act 2024, which took effect in January and placed digital lenders under the regulatory oversight of the Central Bank of Kenya. Mutiso said the law has provided clarity to the industry while enhancing consumer protection.
“The association has already slashed consumer complaints from 4,000 a month to just a handful through the adoption of a stricter code of conduct. It is also working closely with the Office of the Data Protection Commissioner to establish further safeguards,” he said.
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