The tough economic times have seen half of Kenyans borrowing more to meet their daily needs unlike six months ago, a survey shows.
This has pushed many to revert to engaging more than three digital lenders at a time to keep up with the tough financial times.
According to Tala’s 2023 Money March “State of the Economy” report, this is due to fewer full-time jobs and a decline in alternative sources of income forcing consumers to borrow for various reason in the face of growing inflation.
Borrowing for business purposes tops the reason for taking a loan with 67 percent of respondents indicating that they borrowed to meet business expenses and add stock.
Compared to 2022, this was a slight drop from 78 percent as focus shifted to meeting basic needs such as school fees, utility bills, medical care, rent and public transport amid soaring cost of living.
“Compared to 2022, Kenyans are cutting down on spending and saving more in a bid to curb the impact of increasing inflation in their daily lives" says Tala's Senior User Research manager at Tala Teddy Kahiro.
Interestingly, he said Kenyans are also borrowing more, and it is an interesting observation is that over the last six months consumers have channelled more of their loans to their savings such as ‘Chama’ contributions.
The report points out that from the analysis it appears that customers are borrowing from digital lenders to help keep pace with their group contributions, underlying the need for access to affordable credit for continued financial independence.
On spending habits, the survey shows that borrowers spent 25 percent of their earnings in savings with chamas, Saccos or fixed deposit accounts, 22 percent on personal expenses, 23 percent on utility bills and a distant 15 percent on emergencies.
On financial literacy, over half of surveyed customers said they were experiencing increased expenditures over the last six months and want more guidance on creating a budget to manage expenses.
“This is a contrast from last year where consumers wanted guidance on how to start/grow businesses and save effectively,” said Kahiro.
“The hypothesis here could be that people are holding onto money rather than investing it in a new business amidst the on-going economic crunch” Kahiro added.
Tala’s General Manager Munyi Nthigah noted that financial literacy is the only way to help our customers build pathways to a more sustainable and secure financial future.
