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Consumers stay resilient amidst economic headwinds

Kenyan consumers shrugged off macroeconomic headwinds to remain optimistic about their financial prospects in the third quarter of 2022.

According to TransUnion’s Quarter three (Q3) Consumer Pulse Study, eight in 10 (81 per cent) Kenyans expect their household incomes to increase in the coming year, while nearly two in three (64 per cent) say they can pay their current bills and loans in full.

In all, 41 per cent of respondents to TransUnion’s quarterly Consumer Pulse Study said their incomes had increased in the previous three months. Nearly two in three (31 per cent) said their incomes had remained unchanged, while 28 per cent reported decreased household incomes.

Salary reduction was the top reason (29 per cent) consumers said their household income had changed in the month preceding the survey, followed by starting a new business (26 per cent).

These positive signs came despite Kenya’s annual inflation rate increasing to 8.3 per cent in July 2022, according to the Kenya National Bureau of Statistics – the highest since June 2017.

Director of Research and Consulting at TransUnion Africa Weihan Sun said that the main drivers of inflationary pressure were increases in the prices of food and non-alcoholic beverages (up 15.3 per cent year-over-year), transportation (up 7 per cent), and housing and utilities (up 5.6 per cent). The increased costs of necessities are likely to have an impact on consumer spend in the coming months.

“It’s likely that inflationary pressure was curbing discretionary spending among Kenya’s households in the three months leading up to this survey, and we expect that this trend will continue. However, the fact that the majority of households are still able to service their bills and loan obligations is a sign of resilience, especially during uncertain macroeconomic conditions at a global level,” said Sun.

Of all respondents, 48 per cent said they would make further cuts to their discretionary spending in the three months following the survey.

Regarding bills and debt management, 46 per cent of all survey respondents said they will not be able to pay a current bill or loan in full and intend to pay a partial amount which is affordable to them, but not the entire outstanding balance.

Another 41 per cent of those unable to pay indicated they will use their savings to do so, while 40 per cent are likely to borrow money from a friend or family member to service their current bills and debt obligations.

“Only 35 per cent of Baby Boomers expected to be able to pay their current bills and loans in full. As older consumers begin to enter retirement, this challenge is likely to become more ubiquitous due to the limited sources of disposable income available to service debt obligations among this age group of Kenyans,” said Sun.

Nearly all consumers surveyed (98 per cent) considered access to credit and lending products important to achieving their financial goals. Most consumers (60 per cent) surveyed plan to apply for new credit or refinance existing credit in the next year, led by Baby Boomers, where two-thirds (68 per cent) intend to do so within the next year, followed by Gen X at 63 per cent Millennials at 60 per cent and Gen Z at 56 per cent.

The top three credit products among consumers who said they will apply for new loans or to refinance existing credit in the next year are a personal loan (48 per cent), credit card (33 per cent), or new mortgage, home loan or bond payment (28 per cent).

Two-thirds (65 per cent) of consumers said they conduct up to half of all transactions (finances, retail and business transactions) online, while 35 per cent of Millennials and Gen X consumers claimed that they conduct most of their transactions online.

Most consumers (78 per cent) believe monitoring their credit is very or extremely important, and 77 per cent said they monitor their credit at least once a month. Younger consumers were more active in monitoring their credit, with 23 per cent of Gen Z consumers and 22 per cent of Millennials monitoring their credit daily, compared to 9 per cent of Gen Xers and 5 per cent of Baby Boomers.

Two-thirds (65 per cent) believe their credit scores would increase if businesses leverage alternative data sets not included on a standard credit report, like rental payments, gym membership payments, and buy now, pay later (BNPL) products, among others.

By Joseph Ng’ang’a

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