Kenyans turn to digital lenders for financial support, mainly for medical bills

The number of Kenyans seeking loans from digital lenders has been on the rise in the last two years due to the harsh economic times.

According to the Digital Financial Services Association of Kenya (DFSAK), a huge chunk of the loans is going towards settling medical bills.

This came as the association cried out for a fair playing field for players in the sector, including banks, Saccos, and digital lenders.

This emerged during the ongoing National Credit Market Convention at Lake Naivasha Resort, where it was revealed that Non-Performing Loans (NPLs) had risen by over 16 percent as of June 2024.

The Chairman of DFSAK, Kevin Mutiso, noted that despite the harsh economic times, the sector had recorded growth as more Kenyans sought financial support.

Addressing the press on the sidelines of the meeting, Mutiso said that currently, digital lenders were dispensing over Ksh.10 billion in loans every month.

He noted that 43 percent of the loans were going towards supporting businesses, adding that they were keen to raise this to 60 percent in two years.

Mutiso similarly noted that in 2010, there were no digital lenders, but currently, there are over 400, and the sector has seen tremendous growth as more people seek support to protect their families from the harsh economic times.

However, he expressed his concern over the planned amendment of digital lending regulations, noting that they were unfair to digital lenders.

"We have the tax law amendment Bill that is in Parliament. We are trying to solve some of the challenges we have in tax. There is discrimination in how we are treated as financial institutions. The other financial institutions have a different tax rate yet the product is exactly the same," he said.

"We are also not allowed to put right-offs in our allowable and of course if someone doesn't pay you back that means we have incurred losses."

On his part, the CEO of Metropol CRB, Gideon Kipyakwai, admitted that cases of default were on the rise among SMEs due to the failure of the government to pay pending bills.

Kipyakwai noted that the high interest rates by lenders and the rising numbers of Non-Performing Loans (NPLs), which stood at over 16 percent, had adversely affected the sector.

"People are borrowing loans at very high interest rates and it is because of losses that come about because of lending," he said.

According to Kipyakwai, the financial sector is grappling with challenges centred on multi-regulatory compliance, cybersecurity threats, digital transformation, and data privacy.

He added that despite these challenges, financial institutions were keen to exploit data and analytics to expand their knowledge of new and existing customers’ preferences in response to emerging cultural shifts.

He also said that the Hustler Fund has come in handy to support millions in the country at a time when purchasing power has been eroded and there is little cash flow among consumers.