The number of individuals tapping digital loans has risen sharply since the Central Bank of Kenya (CBK) took oversight of the sector, a new household survey has shown, underlining the impact of a clampdown on rogue lenders.
The FinAccess Household Survey 2024 shows that since 2021, Kenyans using services of microfinance institutions such as digital credit providers have increased fivefold, ending a stagnation that had seen less than two percent of adult Kenyans borrow from the platforms as their infamous habit of shaming borrowers was met with public outcry.
The survey shows that 8.8 percent of Kenyans borrowed from digital lenders this year, an increase from 1.7 percent of Kenyans who borrowed in 2021 and 2019.
“The regulation of digital credit providers has contributed to a marked increase in the usage of microfinance institutions, rising from 1.7 percent in 2021 to 8.8 percent in 2024,” the Finaccess survey states.
The survey notes that regulation of the digital credit providers in the country is among actions that have improved Kenya’s financial inclusion landscape and increased credit consumption, with more businesses being registered to offer app-based digital loans and mobile money credit.
The survey notes that an increase in the number of digital lenders, coupled with a high mobile money penetration in Kenya, has provided a convenient and accessible way for adults to secure loans.
The CBK has since 2022 reined in digital lenders in the country over a widespread habit of shaming borrowers and infringing on their privacy by calling borrowers’ contacts when they delayed paying loans, a move that has instilled discipline in the industry since.
The latest CBK update shows that by October 2024, 85 digital credit providers had been licensed to provide the services in the country, out of 730 providers who have applied for the license since March 2022.
Digital Credit Providers (DCPs) who have not yet been licensed are still allowed to provide services, but will eventually be required to meet the strict legal requirements before being licensed.
“The focus of the engagements has been inter alia on business models, consumer protection, and fitness and propriety of proposed shareholders, directors, and management. This is to ensure adherence to the relevant laws and importantly that the interests of DCPs customers are safeguarded,” the CBK said in October.
The CBK has been driving the process to license the credit providers in collaboration with other regulators, including the Office of the Data Protection Commissioner.
