Tough times force Kenyans to borrow to eat

Kenyans are borrowing more than Sh13 billion per month from digital lenders, much of which goes to food.

This paints a picture of cash strapped population that cannot make ends meet.

This revelation by the Digital Financial Services Association of Kenya (DFSAK) shows the extent to which majority of the population is oscillating between empty wallets and empty plates.

DFSAK Chairperson Kevin Mutiso says the Sh13 billion advanced monthly, which translates to Sh433,000 daily, is by the 40 registered members of the association. Mutiso says most borrowers tapping into the facilities do so largely for consumption.

“Our data indicate that Kenyans are borrowing around Sh13 billion every month from various digital lending platforms. Most of this is going towards buying food and other basic needs for their families,” he said during the National Credit Market Convention in Naivasha on Friday.

This data mirrors another report by the Central Bank of Kenya (CBK) that details how borrowers are unable to repay small loans borrowed from digital credit providers (DCPs).

The report by CBK indicates that loans of Sh1,000 and below had a non-performing loan (NPL) ratio of 83.1 per cent as at June this year, while 69.4 per cent of those between Sh1,000 and Sh5,000 were in default.

This means eight in every 10 individuals who borrow sums below Sh1,000 and seven in every 10 who borrow between Sh1,000 and Sh5,000, default.

Yet, according to the CBK document titled Kenya Financial Sector Stability Report published this month, digital lenders advanced Sh76.8 billion as at June 2025 to 5.5 million borrowers.

Just five years ago, the number of borrowers digital lenders served was 600,000.

There are 153 digital lenders registered by CBK.

Since March 2022, CBK says it has received more than 700 digital lender applications, which means the amount of indebtedness could be more than what is officially known.

Mutiso said 84 per cent of Kenyans have access to financial services currently and the lenders are working with CBK on new regulations that seek to address rising concerns and gaps, including rogue lenders.

“We have engaged CBK to review core capital from Sh20 million to Sh50 million in order to streamline the sector and weed out rogue lenders,” he said.

“A person who seeks to carry out a non-deposit-taking credit business in Kenya and whose initial capital is more than Sh20 million shall apply to the Bank (CBK) for a license,” says CBK in its draft regulations that seek to regulate digital lenders by transforming them into non-deposit taking credit providers.

But while business may be booming for digital lenders, whose success seemingly coincides with an economy that is serving a majority of Kenyans unequally, Samuel Nyandemo, a senior lecturer in economics at the University of Nairobi, says such kind of borrowing does not add any value to the economy.

“This is borrowing for purposes of consumption and not production. That really puts the economy in an awkward position,” he told The Standard. “If we go by the concept of bottom-up as prescribed by President William Ruto economics, it has miserably failed.”

Prof Nyandemo says failure in this economic model as pioneered by the President leaves poor Kenyans to seek solace in borrowing from such entities for basic needs, shying away from business and investments, which he argues is a sign that the economy is in a slump.

“We must come to terms with the fact that both the rich and poor have really been put in a fix. You can see most Kenyans are on the verge of desperation financially and many small borrowers are resorting to shylocks or borrowing from various financial entities,” said Nyandemo.

In its report, CBK says the seven to 60 days maturity period of most of the small loans by DCPs make them relevant for meeting emergency needs and working capital for small business.

“However, the loans are too small to enable households and businesses to make investments that have significant impact on earnings. The obtaining of digital loans also predisposes providers to risky borrowers,” says the regulator.

To show how cyclic the level of indebtedness is, the 2024 FinAccess Survey compiled partly by CBK, FSD Kenya and Kenya National Bureau of Statistics (KNBS), shows going hungry is one of the strategies borrowers are employing to repay.

“Strategies employed by households in debt repayment and resolving household indebtedness in 2024 include; cut down on other expenses (food and non-food), ran down savings, looked for additional work/business and took another loan to repay.

“The most popular action to repay is by reducing expenses on food, with females surpassing males by recording 63 per cent and 57.1 per cent respectively,” the survey says.

“The least sought action to pay is by selling or giving assets and belongings, which saw females record 20.7 per cent and males 23.1 per cent. Males are more willing to part with their assets and belongings as compared to females.”

For players in the DCP sector, however, their presence has some positives.

Mutiso says digital lenders have been very impactful to the economy. This might be the reason why borrowers of Sh50,000 to Sh100,000 have the lowest NPLs ratio of 16.4 per cent.

“Our members finance the acquisition of about 230,000 smartphones,” he said.

Such is the case for bodaboda operators. He says 68.4 per cent of the 2.4 million motorbikes on the road are financed through digital credit providers.

Metropol Corporation managing director Sam Omukoko says credit advancement has grown even as he cautioned against NPLs.