Kenyan Loan Apps Reach 49 as Majority Borrow for Business Purposes

The digital credit sector has grown tremendously in Kenya thanks to a wide array of a total of 49 loan apps available on Google Play Store.

While some of these apps are more effective and trustworthy than others, the one thing that has remained consistent is the number of borrowers.

According to a report from FSD Kenya, people borrow not only from one lender but from several mainly for business purposes and to meet their daily household needs.

FSD posits that 35 percent of those with access to mobile loan apps borrow from any digital lender while 29 percent specifically borrow from M-Shwari. KCB M-Pesa, Equity Eazy, Tala, and MCo-op Cash follow with 12 percent, 4 percent, 1.8 percent, and 1.3 percent respectively.

Those who borrow for business purposes such as investment or payroll stands at 37 percent followed closely by borrowing for meeting day-to-day ordinary household needs at 35 percent.

Of the borrowers, 20 percent use the loans for school expenses, 15 percent borrow for airtime purchase, 10 percent to pay bills, 10 percent for household goods, 7 percent for medical needs, and 17 percent for miscellaneous purposes. Those who try the apps to see if they are effective are 5 percent while another 3 percent borrow for betting purposes.

Unfortunately, with the increased loan apps comes the responsibility of having to pay back. From the report, customers have had complaints with most of them reaching out to the customer care for a reason or two.

The data shows that 47 percent of those who borrow repaid their loan late with another 12 percent defaulting on the credit.

Consequently, some of the actions taken to repay the loan includes borrowing money for the repayment, skipping of necessary expenses, selling off assets, cutting on food purchases and foregoing medical needs.

Some of the reasons the lenders give as to why they paid or defaulted their loan apps include claims of being charged unexpected fees, the lender withdrawing their money without notice, and not fully comprehending the costs or the fees in the terms of service.

Meanwhile, some borrowers contacted the lender for a higher loan limit, to complain about unexpected charges, to question about a charge or a fee, or to complain about their information being forwarded to the Credit Reference Bureau (CRB).

Kenya isn’t the only country with loan apps on the rise. The same trend goes on in Tanzania, and despite the few quibbles surrounding the industry, at least many people even in the rural areas have a reason to smile for easy accessibility of funds.