Most Kenyans hooked on digital loans to stay resilient in tough times

A majority of Kenyans accessing digital loans have been forced to seek the services of two or more lenders in a bid to keep up with the challenging economic times.

This comes in the wake of increased borrowing through the digital space since the reopening of the economy even as it emerged that half of Kenyans taking loans are burdened by expenses, and saving is an afterthought due to the strain of expenses on their earnings.

According to Tala’s “MoneyMarch 2022” report, which sought to ascertain Kenyans’ financial literacy levels, health and resilience, 59 per cent of customers have increased their borrowing in the last 6 months. “Sixty-seven per cent of our interviewees said their income had increased in the past six months but 53 per cent cited higher expenditure in the past six months,” said Teddy Kahiro, User Research Manager at Tala.

The report that sought to understand the digital customers, their needs, how their preferences are changing and how we can evolve to meet their needs disclosed that 52 per cent of customers borrow between Sh25,000 and Sh30,000 on each borrowing occasion.

Despite the survey showing that Kenyans’ financial health and resilience is improving three months into the new year, indebtedness is still an issue. Tala says 53 per cent of customers seeking digital loan services over the past six months claimed their expenditure has increased over the period. The report further revealed that loans taken for personal reasons are majorly to pay school fees accounting for 20 per cent and utility bills at 19 per cent as the average consumer seems to have found ways of raising funds for emergencies such as medical emergencies without needing to take loans for such.

With the country’s economy opening backed up by relaxation of some of the Covid-19 restrictions, Tala says consumers want more guidance from financial institutions on saving effectively and how to start and grow a business.

Increased expenditure

“Generally, expenditure has increased regardless of whether income has increased or not, which speaks to the need for customers to have more than one source of income,’ reads the report.

Tala says that the top reason for 78 per cent of the participants taking loans is business-related, to either pay business expenses or add stock, supported by the finding that 8 out of every 10 respondents have side hustles other than their main income source. “Empowering our customers with a solid education on finances is a key objective for us. We believe financial resilience among the underserved and underbanked Kenyan majority can be enormously boosted by helping them understand how money works in everyday life,” said Annstella Mumbi, Tala’s Country Growth Manager.