Kenyans relying on digital loans for daily expenses amid high cost of living - Report

There has been a noticeable increase in personal loans and digital lending, fresh data from the Central Bank of Kenya (CBK) has now revealed.

According to CBK, over 50% of these borrowers take out loans for their daily expenses, rather than investments or long-term projects.

This comes as many Kenyans have been struggling to keep up with the rising cost of living, forcing a growing number to rely on loans just to make ends meet.

CBK noted that, with inflation rates steadily rising, the purchasing power of the average citizen has been diminished.

Basic goods such as food, fuel, and housing have seen sharp price hikes, making life increasingly difficult, especially for those in the lower income bracket.

In recent years, the Kenyan economy has been hit hard by various factors, including the effects of the COVID-19 pandemic, rising global commodity prices, and unpredictable weather patterns affecting agriculture.

For many Kenyans, earning half a million shillings a year might have once been considered a secure position, but in the current climate, it has become impossible.

A great number now make just enough to cover essential expenses, while others struggle to cater to their most basic needs.

The soaring cost of living has stretched household budgets to the limit, leaving many with little choice but to seek loans to bridge the gap.

This reflects the economic strain that has left many Kenyans resorting to borrowing not just to maintain their lifestyle but to cover basic needs as well.

The growing dependency on loans has raised concerns among financial experts who say loans can offer temporary relief, but they also come with high interest rates that can easily trap borrowers in a cycle of debt.

Digital lending in Kenya has experienced significant growth, offering quick and convenient access to loans. However, this rapid expansion has also led to concerns about high interest rates, which often burden borrowers.

The rise of digital lending apps and shylock businesses has been driven by Kenyans seeking alternative financial solutions to meet their daily needs.

Many Kenyans have found themselves defaulting on repayments, which further complicates their financial standing as they face penalties, increased borrowing costs, and potential legal actions.