Tala Money March report, a research conducted among consumers to understand the impact of cost of living and how credit is helping them, shows that Kenyans could be borrowing to repay their debts pointing to the extent hard economic times has pushed many to the wall.
Almost 6 in every 10 consumers use more than one digital lender, maybe borrowing from one lender to pay another lender, alternatingly, while reducing their loan amount.The loans are directed to business needs, medical expenses and to pay for basics like rent. Loans taken for payment of utility bills is majorly by those in full-time employment (55 per cent in 2024 vs. 70 per cent in 2023) and business owners (13 per cent in 2024 vs. 12 per cent in 2023).
“Loans taken for personal reasons are mainly for paying school fees and loans taken for business needs are more common among consumers whose main income is a full-time job compared to business owners,” the survey notes.
The rate at which consumers apply for loans to pay school fees is higher in 2024 as 33 per cent of people targeted in the survey admitted to have taken a facility to offset school fees arrears, compared to 28 per cent in 2023 and 20 per cent in 2020.
Other types of utility bills paid using loans include internet, phone bill, food, electricity/water, cooking gas and television (Netflix/Showmax/DSTV/Gotv).
According to the survey, the three main factors consumers consider when choosing a digital lender include the interest rate, repayment period, and loan processing time. However, loan collection tactics, customer service, licensed by Central Bank of Kenya, ease of using the app, popularity, star rating in PlayStore, recommendation and advertisement creativity are also common factors.
With the recent advances in technology and ongoing innovations, lending through digital channels, particularly mobile phones, has grown significantly in Kenya. However, concerns have been raised by the public about the predatory practices of the unregulated digital credit providers, and in particular, their high cost, unethical debt collection practices, and the abuse of personal information.
Central Bank has so far licensed 51 Digital Credit Providers after receiving 480 applications since March 2022. The most recently added entities in Digital credit space include Autocheck, Azura, Chapeo, Chime, Creditarea, Decimal, Dexintec, Factorhouse, Fezotech, Fortune, Lipa Later, Lobelitec, Maralal Ledger, Marble Capital, MKM Capital, Pi Capital, Senti Capital, Ubapesa and Zillions Credit.
The availability of buy now pay later services by Safaricom, LipaLater, MasterCard, Aspira and Craft Silicon also make loan access to Kenyan consumers much easier. The solutions enable consumers to get large ticket items from retail chains such as supermarkets and pay at an agreed time.
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