Finances: Kenyan Digital Borrowers 6 Million Strong, Study Finds

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Six million Kenyans, representing close to a third of the country’s adult population are digital borrowers, a report termed ‘The Digital Credit Revolution in Kenya’ reveals. The report is collaborative study by Financial Sector Deepening Kenya (FSD), the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics (KNBS) and the Consultative Group to Assist the Poor (CGAP).

Digital Credit Market

In the last six years, Kenya’s digital finance market has grown tremendously with an array of players; traditional banks, telecommunication companies and mobile application developers. By market share, Mshwari- a collaboration of Safaricom PLC and Commercial Bank of Africa, leads the pack with 28.8%, followed by KCB-Mpesa at 12% and Equity Eazzy by Equity Bank at 3.9 %, as Tala, MCoop Cash and Branch complete the list with less than 1 %.


The study found that half of Kenyans have mobile phones but don’t borrow, an indication of the available potential in the digital finance sector. According to a report by the McKinsey Global Institute, digital finance has the potential of adding $ 3.7 trillion to the GDP of emerging economies like Kenya. Nevertheless, loans can only spur development if they are used for productive tasks. Encouragingly in Kenya, the study found that a majority of borrowers use loans for businesses and for day to day household needs.

The demographic of the digital borrower compared to a typical Kenyan phone owner is that they are younger, more likely to be male (55 percent) and are more educated (the study found zero digital borrowers with a total lack of education). Additionally, digital borrowers are more likely to be in business or employed than they are to be farmers or dependant on the family.

Digital borrowing
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A worrying trend, however, is that digital borrowers are twice as likely to have tried mobile betting at least once before. It is ironic that although digital finance has improved people’s livelihoods through financial inclusion it has also fuelled the emergence of a vibrant betting industry in the Country. “Betting transfers have been among the leading Airtel Money transactions, especially over the weekends and when the English Premier League is on, “said Adil El Youssefi, Chief Executive Officer Airtel Kenya.

Risks and challenges of digital borrowing

The study found that the biggest challenges customers faced were short payment periods and a lack of transparency. Lenders charged unexpected fees and withdrew money from customers’ accounts without warning. Lack of transparency and full disclosure about the cost of the loans customers were receiving from financial institutions is one of the reasons that motivated the introduction interest capping in the Banking Amendment Act 2016.

According to the amended law, all financial institutions are required to disclose all charges and terms to consumers, failure to which is illegal. Additionally, interest charged on loans cannot go beyond the Central Bank of Kenya’s benchmark rate, which currently stands at 9.5 %. However, the discussion is ongoing about changing the law to enable banks to continue lending to SMEs who have been starved of credit ever since the law’s enactment. All in all, consumers should only take a loan-whether mobile based or in a bank when they have fully understood the terms and conditions involved.

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