Kenyans are Surviving on Loans that Majority are Defaulting on-CBK report

Kenyans are struggling to repay their loans according to the 2019 Central Bank of Kenya and Financial Sector Deepening Trust Fin Access Household Survey released on Wednesday.

The survey indicates that over 50 percent of Kenyans are struggling to service their loans while a majority of that are forced to sell off assets at low prices to repay their loans.

The survey has also brought to light that most Kenyans in the employment sector are receiving half the salaries they are supposed to so as to service loans.

The survey indicates that an estimated 70 percent of adults (over 18 years of age) have personal loans where they have been forced to sell off their assets or to part with a huge chunk of their salary to service their loans. 18 percent of Kenyans have helplessly defaulted on their loans leading to an auction of their property.

In what the survey report termed as the debt stress, acting Director of research at CBK Raphael Otieno said that most of the loan consumption held no returns hence the huge number of defaulters.

‘’Growth in financial inclusion in the country has come with equal shares of challenges,” Mr. Otieno noted while adding that multiple uptakes of loans were overwhelming borrowers, forcing them to borrow more to repay.

Consumption debt which does not necessarily target to create income to service the loan is creating so may loan defaulters. The CBK survey shows that only 6 percent of loans taken are meant for production while 72 percent of the loans are meant for personal consumption.

Kenyans do not necessarily take up loans for emergency purposes as the report indicated that only 9 percent of the total number takes up loans for the cause while 13 percent of them pay for occasional expenses.

Shopkeepers are feeling the heat most after the survey revealed that Kenyan’s credit has increased in three folds from 9.9 percent in 2016 to 29.7 percent. Shopkeepers have been ranked by the survey as the highest source of personal loans among Kenyans standing at a worrying 90 percent.

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The ease with which Kenyans access loans has been cited that the loans are available collateral free and are not presented on a monetary form.

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The survey indicated that majority of Kenyans are still struggling with insufficient income which has 60 percent of them regularly running to the shylocks to ensure survival.

Saccos and Micro Finance Institutions (MFI) and banks do not lend as often mainly because borrowers fear getting auctioned when they default, however those that take up the loans are investing it at 18 and 16 percent respectively more compared to other sources of loans.