The Digital Credit Providers have registered major growth in the last few months after currently disbursing over sh.13 billion as loans to borrowers monthly.
This growth has largely been driven by the ease of access to digital lending platforms, particularly via mobile devices.
The sector has recorded a rise in accounts from 600,000 to 3.32 million over the past two years as more Kenyans tap loans to offset their basic needs amidst sluggish economic growth.
According to Kevin Mutiso, Chair of the Digital Financial Services Association of Kenya (DFSAK), around 5.5 million Kenyans currently access loans totalling over Sh.13 billion every month from 40 registered agencies.
While most borrowers take out loans primarily for consumption, Mutiso noted that the sector has also supported Kenyans in financing their enterprises and start-ups.
He added that, in recent years, the industry has facilitated access to over 230,000 smartphones through loan financing and funded more than 68 million motorbikes on Kenyan roads.
However, he dismissed concerns regarding rising default rates, stating that the sector has adopted the use of artificial intelligence and big data from credit bureaus to identify high-risk borrowers.
Mutiso also noted that 84 per cent of Kenyans currently have access to financial services. He mentioned that the association is working with the Central Bank of Kenya (CBK) on new regulations aimed at addressing sectoral challenges, including the issue of rogue lenders.
“We have engaged the CBK to review the minimum core capital requirement from Sh. 20 million to Sh. 50 million in order to streamline the sector and weed out rogue lenders,” said Mutiso.
Meanwhile, Sam Omukoko, Founder and Group Managing Director of Metropol Credit Bureau, stated that the sharing of credit information has significantly enhanced access to loans for millions of Kenyans.
Omukoko, however, expressed concern about the rise in non-performing loans within the sector, currently averaging 20 per cent. He attributed this trend to harsh economic conditions and the fact that many Kenyans borrow for consumption rather than investment or growth.
He said that Metropol has so far registered over 27 million accounts that have accessed credit and stressed the need for lenders to curate products that better suit the needs of their customers.
Ali Hussein, Chair of the Fintech Alliance of Kenya, raised concerns regarding the protection of borrowers’ data, which has been exploited by unscrupulous players in the sector.
Hussein also emphasised the importance of promoting borrowers’ financial wellness, following reports of high levels of indebtedness caused by access to multiple loan facilities.
David Sandaji, CEO of the Sacco Societies Regulatory Authority (SASRA), reported that over 120 SACCOs have rolled out digital products, allowing Kenyans to access various loan facilities.
He, however, flagged cyber security risks stemming from the sharing of consumer data and urged agencies to implement built-in mechanisms to mitigate such threats.
By Erastus Gichohi
