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More Kenyans seek loans as poverty bites

Friday April 12 2019

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In Kenya, over 50 per cent of debtors sell their assets, borrow or cut back on expenses to repay their loans. ILLUSTRATION | NATION MEDIA GROUP 

BRIAN OKINDA
By BRIAN OKINDA
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Majority of Kenyans struggle to make ends meet, according to a new household survey.

Due to poverty, borrowing is fast rising among Kenyans. And despite the spread of formal financing, more than 60 per cent of Kenyans still use informal borrowing solutions such as chamas, friends, family.

The most desperate take goods on credit from their local shopkeepers, just to get to the end of the month.

Between 2016 and 2019, the number of Kenyans taking goods on credit from shopkeepers rose from 10 per cent to 30 per cent.

The findings are part of a survey released by FinAccess, which measures the access, usage, quality and impact of financial services in Kenya.

DEBTS

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Taking loans from groups or chamas, family, friends and neighbours as well as mobile banking platforms also contribute to the perception that Kenyans are borrowers.

These debts however come with challenges, as over 50 per cent of debtors sell their assets, borrow or cut back on expenses to repay their loans.

A quarter of these individuals have been over-leveraged with debt servicing and repayments consuming over half of their monthly expenditure.

About 18 per cent have effectively defaulted and over two thirds of borrowers experienced at least two of these circumstances.

In the same breadth, uptake of mobile banking has considerably gone up from six to 10 per cent within the same 2016-2019 period.

DIGITAL LOANS

This is mainly deployed in bill payment, as nearly half of internal remittances are now digital.

Saccos, microfinance institutions and traditional banking (not including mobile banking) on the other hand, are no longer highly regarded by majority of Kenyans.

Use of mobile money, mobile banking, and digital apps has risen considerably, with digital apps now being used by two million people.

About 79 per cent of Kenyans have mobile money accounts, 25 per cent have mobile bank accounts, while eight per cent take digital loans.