TOUGH ECONOMY

Shopkeepers top lenders in Kenya - CBK report

In Summary

• Households borrowing from shopkeepers are the highest in over a decade with the last high recorded in 2006 at 22.8 per cent.

• This form of credit was also highest, beating even the fast rising digital loans which grew to 8.3 per cent from 0.6 per cent in 2016.

A shopkeeper displays a credit book.
A shopkeeper displays a credit book.
Image: DOUGLAS OKIDDY

It is 9am. Janet,a shopkeeper  in Rivarori market in Gachie, Kiambu  County has already  loaned out three kilos of sugar, four packets of milk and six exercise books to customers.

At the corner of her shop lies three filled up 200 page exercise books where she records customers’ debts. In 2005, she filled only two 96 page books but she has already filled three since June last year.

‘’Things are tough. Customers are borrowing more than before. I lend to at least ten people every day. Do I have a choice? They are parents, ‘Janet said.

She told the Star that most people borrow maize flour, cooking fat, sugar, bread and milk.

Janet’s story is captured in the FinAccess Household Survey 2019 released yesterday by Central Bank of Kenya and Financial Sector Deepening Trust (FSD) that showed credit from shopkeepers has tripled to 29.7 per cent from 9.9 per cent in 2016.

According to the study, households borrowing from shopkeepers are the highest in over a decade with the last high recorded in 2006 at 22.8 per cent.

This form of credit was also highest, beating even the fast rising digital loans which grew to 8.3 per cent from 0.6 per cent in 2016. Loans from family, friends and neighbours also surged to 10.1 per cent from 6.6 per cent.

Even so, personal loans from banks dropped marginally to 4.3 per cent from 4.4 per cent in 2016. Credit from micro finance institutions also dropped by half since 2016 to 0.9 per cent.

The credit profile of households perhaps illustrates the tough economic times many Kenyan families are going through, with the survey showing that 51 per cent of Kenyans are living hand to mouth.

In 2016, only 34.3 per cent of Kenyans were in the red financially.

The annual survey indicated that the rising inflation leave households with little or nothing to save, forcing them into debt cycle.

‘’The cost of living has been rising. Kenyans are spending more on health, transport and housing. The worsening climatic condition has taken toll on agriculture, affecting food production. This has dented financial health of families,’’ CBK governor Patrick Njoroge said.

His sentiments were shared by the acting director of research at CBK Raphael Otieno who attributed the worsening financial health of households to poor microeconomics, especially a drop in agriculture productivity due to bad climate.

The study also linked the rising inflation to the high tax regime. Last year, the government imposed 16 per cent VAT on petroleum products, which had a negative spiral effect on the general economy.

It also raise excise tax on cash transfer from 12 per cent to 20 per cent, and that of calls and data from 10 to 15 per cent.

Even so, more Kenyans are getting access to financial services, with the survey that sampled 8,669 households showing that 82.9 per cent adults aged above 16 years are formally included compared to 75 per cent in 2016.

This means, eight out of 10 adult Kenyans are accessing financial services. This growth has seen Kenya retain its third position in the continent behind South Africa and Seychelles.

Nairobi and Mombasa have the highest financial inclusion rate in the country at 96 per cent and 94 per cent respectively.

North Rift Valley region including areas around Eldoret had least inclusion rate at 57 per cent.

North Eastern Kenya recorded the highest inclusion growth of over 60 per cent to hit 84 per cent.