•Access to formal bank loans remains a challenge for most marginalised Kenyans, owing to the absence of collateral asked by commercial banks.
•Stress in the financial sector has soared since the coronavirus pandemic hit in March with about 70 per cent of borrowers seeking a moratorium on loans.
Demand for education loans is expected to register a record high beginning July when form one students will be commencing classes, Jijenge Credit projects.
According to the micro-lending firm, the demand will be driven by the huge number of pupils–1,179,192 candidates who sat 2020 KCPE examinations as well as the tough financial environment brought by the Covid-19 pandemic.
“We are already getting several requests ahead of the form one selection process which had been planned for May 28 and students were due to join secondary schools in July. This demand will peak in the month of June all through to July,” chief executive Peter Macharia said in an interview.
Microfinance has been an effective tool for many Kenyan households, most of whom are quietly picking the pieces since the Coronavirus pandemic hit in March 2020.
Access to formal bank loans remains a challenge for most marginalised Kenyans, owing to the absence of collateral asked by commercial banks and many financial institutions.
“Over the last few years we have seen a rapid increase in education loans but this year that demand has been heightened because of the pandemic that saw many families and breadwinners’ financial abilities put under pressure…but we are ready to meet that surge,” said Macharia.
Secondary (education) quality, tuition fees, acceptance cut-offs, and education demand are all determined in a general equilibrium model and depend on the borrowing constraints faced by households.
Macharia says the company last year disbursed over Sh100 million for pandemic-related loans and moratoriums–signaling the dire demand for loans among Kenyans who are reeling from the adverse impact of the third wave and a distraught economy.
Kenya’s economy is expected to expand by 6.3 per cent this year, a rebound from a contraction of 0.1 per cent last year, aided by schools re-opening and the removal of Covid-related restrictions nearly three weeks ago.
As a result, Jijenge boss says industry players are racing to fill financial gaps by offering loans quickly to those struggling financially as a result of the pandemic, with more Kenyans still out of work and their ability to borrow is also limited.
Stress in the financial sector has soared since the coronavirus pandemic hit in March with about 70 per cent of borrowers seeking a moratorium on loan repayments as their incomes dipped and savings were eroded.
The jump in the uptake of the loans emerged in a period when the economy shed more than two million jobs on the back of sluggish corporate earnings in the wake of Covid-19 economic hardships.
Jijenge Credit is a non-deposit taking microfinance lending institution with over 10,000 clients in Kenya, Sudan and Tanzania, and it's headquartered in Nairobi.
It offers several clusters of loans including logbook loans–its core business offering.
“Going forward, we expect financial sector players to continue leveraging on their digital platforms to boost lending (short term lending) and drive transaction volumes,” Macharia said.