- The mobile loans however still took the lion’s share of the active loan accounts in the country, at 50.61 per cent.
- The banking sector remained the backbone of the credit industry with the highest loan balances accounting for 96.16% of the market with 27.03M active accounts.
Image: HANDOUT
State backed digital lending platform Hustler Fund could be triggering a shift in the traditional loan sourcing from banks and other digital lenders.
Iinformation and insights company, TransUnion, says although the actual data on the impact is currently unavailable, the fund’s impact cannot be downplayed based on the recent figures.
“More consumers are arguably leaning towards the fund which is offering credit at lower rates compared to other lenders in the market, a trend that could be cutting down numbers of traditional mobile loans from banks and other digital lenders,” said Morris Maina, the CEO at TransUnion.
He said this was made worse by the forex exchange pressure witnessed most of last year that saw the shilling hit lows of 160 to the US dollar, as well as the tight monetary policy that has seen the base lending rate rise to highs of 13 per cent.
TransUnion's report covering the three-month period to December 2023 shows the number of new mobile loans and their value decreased by 20.5 per cent and 9.5 per cent, respectively.
This is from Q1 2023 to Q4 2023.
The mobile loans however still took the lion’s share of the active loan accounts in the country, at 50.61 per cent.
According to the firm, the contraction mirrors the cautious stance of consumers amidst a fluctuating economic environment occasioned by high interest rates and high cost of living on the back of costly imports as Kenya is still a net importer.
The banking sector remained the backbone of the credit industry with the highest loan balances accounting for 96.16 per cent of the market with 27.03 million active accounts.
Notably, the low value overdrafts (less than Sh6,000 of the principal amount) continued to underpin accessible credit in the country, representing 34.89 per cent of all active loan accounts, holding a balance of Sh13.06 billion.
However the study revealed a 15.9 per cent decrease in the value of new low value overdrafts booked to Sh6.68 billion from Sh7.94 billion in the the previous year, same quarter.
Despite this, the average quarterly limit edged up 2.05 per cent from Sh730 to Sh745, suggesting a more nuanced shift in the financial landscape and strategic loan structuring by lenders to accommodate evolving market needs.
An overdraft occurs when one does not have enough money in their account to cover a transaction, but the lender pays the transaction.
On the other hand, the high value overdrafts (amounts higher than Sh6,000), recorded an increase in the value of newly booked ones.
They increased to Sh35.61 billion in the period under review from Sh20.9 billion of the comparative quarter last year.
High value overdrafts made up 2.03 per cent of all active loan accounts in the country, commanding a balance of Sh506.6 billion in the period under review.
Also worth-noting, millennials emerged the highest borrowers.
They accounted for 51.1 per cent of the principal amount of mobile loans and 52.9 per cent of personal loans.
"The increasing demand for credit products by younger generations has pushed firms to invest in digital banking incentives for younger people such as low interest loans and low overdrafts which have been received positively by the young market," the report reads.