The pivotal role of digital credit in Kenya’s economy


Digital credit has revolutionised access to finance, empowering individuals and businesses alike, and propelling Kenya towards a more financially inclusive society. FILE PHOTO | POOL

Kenya has emerged as a global leader in digital innovation, with one sector, in particular, playing a vital role in driving economic growth and financial inclusion: digital credit.

By leveraging the power of technology, digital credit has revolutionised access to finance, empowering individuals and businesses alike, and propelling Kenya towards a more financially inclusive society.

The key role of available and affordable digital credit in Kenya’s economy can be captured in four key pointers:

Financial Inclusion

According to the 2021 Financial Access Household Survey by the Kenya National Bureau of Statistics, the percentage of Kenyan adults with access to formal financial services has grown to 94.4 percent.

This surge is largely attributed to the widespread adoption of digital credit platforms, which have made financial services more accessible and convenient, especially for underserved populations in rural areas to start businesses, invest, and improve their livelihoods.

SME Growth and Job Creation

Small and Medium-sized Enterprises (SMEs) are the backbone of Kenya's economy, driving employment and economic diversification.

Despite the tough economic times, recent statistical data underscores the crucial role of digital credit in fuelling the growth of these enterprises and expansion.

A study by the Kenya Bankers Association in 2022 revealed that 87 percent of digital credit borrowers were SME owners, using the funds to invest in working capital, purchase equipment, and expand their businesses.

Boosting Agriculture

 Agriculture is a vital sector in Kenya, and digital credit has played a transformative role in revolutionising the industry.

Recent statistical evidence highlights the significant impact of digital credit on agricultural productivity and income growth.

A study conducted by the Alliance for a Green Revolution in Africa found that digital credit borrowers experienced a 25 percent rise in income, enabling them to invest in modern farming techniques and inputs, thus fostering sustainable agriculture.

Economic Growth

 Digital credit has made substantial contributions to Kenya's economic growth. The Central Bank of Kenya reported that digital credit disbursed in 2021 amounted to approximately Sh437 billion, representing a 48 percent increase compared to the previous year.

This infusion of credit has stimulated consumption, boosted business activities, and propelled overall economic growth.

Moreover, the World Bank estimates that digital credit could contribute up to two percent of Kenya's GDP growth by 2025, highlighting its potential to drive the country towards a more prosperous future.

Digital credit has emerged as a transformative force in Kenya's economy, fostering financial inclusion, driving SME growth, empowering the agricultural sector, and fuelling overall economic development.

Digital credit providers offer tailor-made products set to serve the needs of customers like flexible loan repayment that cushions individuals and businesses, especially during tough economic shocks.

As Kenya continues to leverage technology and innovative financial solutions, policymakers and fintechs must collaborate to maximise the potential of digital credit.

By nurturing an enabling environment and embracing digital innovations, Kenya can solidify its position as a global leader in the digital economy, where financial inclusion and sustainable economic growth go hand in hand.

The writer is the head of growth and strategy, at Tala Kenya.

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