Debt stress hit families as loans pile - CBK report

In Summary

• The survey shows 72 per cent of loans taken by adults aged above 18 years is for personal consumption.

• At least 60 per cent of Kenyans run  to Shylock to stay afloat.

CBK governor Patrick Njoroge
CBK governor Patrick Njoroge

Households are struggling to service debts, with more than 50 per cent forced to borrow elsewhere or sell assets to repay loans.

The 2019 Central Bank of Kenya and Financial Sector Deepening Trust FinAccess Household Survey released on Wednesday shows a quarter of borrowers in the country spend half of their salaries to repay loans.

At least 18 per cent of borrowers have no other option but to default.


According to the survey, almost 70 per cent of adults aged 18 years and above with personal loans have experienced at least two of those conditions or both, illustrating signs of debt stress.

Acting director of research at CBK Raphael Otieno attributed the debt stress to nature of use, saying most of it is for consumption hence no returns.

‘’Growth in financial inclusion in the country has come with equal shares of challenges,” he said.

“Multiple uptake of loans is overwhelming borrowers, forcing them to borrow more to repay. Most of the debt is for consumption.”

The survey shows 72 per cent of loans taken by adults aged above 18 years is for personal consumption, nine per cent for emergency, 13 per cent for paying infrequent expenses while only six per cent is for production.

Credit from shopkeepers which has grown three fold from 9.9 per cent in 2016 to 29.7 per cent is the highest source of personal loans consumed by households at 90 per cent.

According to researchers, shopkeepers debt is easy to access, non monetary and collateral free, hence ideal for consumption.

Borrowers feared to consume credit from Saccos, Micro Finance Institutions (MFI) and banks.

Households are investing credit from Saccos and MFI and banks at 18 and 16 per cent respectively more than other sources of loans.

Furthermore the survey indicated that Kenyans are still struggling to manage income shortfalls with 60 per cent running to Shylock to stay afloat.