Inflation Pushes Kenyans To Borrow More From Digital Lenders And Shopkeepers

Half of the Kenyan consumers are borrowing more compared to six months ago with incidences of those using more than three digital lenders on the rise.

According to Tala’s 2023 MoneyMarch “State of the Economy” report, this is attributed to fewer full-time jobs and declined alternative sources of income forcing consumers to borrow in order to pay for living expenses in the face of growing inflation.

Borrowing for business purposes remained the top reason for taking a loan as 67 percent of respondents indicated that they borrowed to meet business expenses and add the stock.

Compared to 2022, this was a slight drop from last year’s 78 percent as Kenyans shift focus to meeting basic needs such as school fees, utility bills, medical care, rent, and public transport amid the soaring cost of living.

“Compared to 2022, Kenyans are cutting down on spending and saving more in a bid to curb the impact of increasing inflation in their daily lives. More generally, we are also seeing Kenyans borrowing more, and it is fascinating to note that over the last six months, consumers have channeled more of their loans to their savings such as ‘Chama’ contributions.

It appears that customers are borrowing from digital lenders to help keep pace with their group contributions, underlying the need for access to affordable credit for continued financial independence during challenging economic times ” said Teddy Kahiro, Senior User Research manager at Tala while presenting findings to media and industry stakeholders.

While speaking on spending habits, Teddy said that the report presented a unique perspective on what respondents were spending.

They revealed that they spent 25 percent of their earnings in savings with chamas, saccos, or fixed deposit accounts, 22 percent on personal expenses, 23 percent on utility bills, and a distant 15 percent on emergencies.

On financial literacy, over half of the surveyed customers who said that they were experiencing increased expenditures over the last six months, want more guidance on creating a budget to manage expenses.

“This is a contrast from last year where consumers wanted guidance on how to start/grow businesses and save effectively” noted Mr. Kahiro. “The hypothesis here could be that people are holding onto money rather than investing it in a new business amidst the ongoing economic crunch” concluded Teddy.

“Empowering our customers with education on how to manage their finances has always been a key objective for Tala. 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 Munyi Nthigah Tala’s General Manager during the media event, which also marked the start of the company’s annual financial literacy campaign christened Tala MoneyMarch.

“Financial literacy is the only way to help our customers build pathways to a more sustainable and secure financial future,” he emphasized.

Related Content: 25% Of Tala Customers Are Borrowing To Save