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Six million tap loan apps as report warns of danger

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Digital borrowers tend to borrow frequently. FILE PHOTO | NMG

More than one in four Kenyans —or more than six million people — has taken a digital loan highlighting the central role mobile lending applications play.
A report by the Financial Sector Deepening Kenya, the Central Bank of Kenya and the Kenya National Bureau of Statistics shows Kenyans turn to the digital micro-loans mainly for short-term working capital due to their convenience.
“The findings suggest that digital credit has become a leading source of credit in Kenya and that it is mostly used to finance working capital and day-to-day consumption needs,” says the survey.
The study, however, warns that while the popularity of lending apps represents a tremendous step for formal financial inclusion, more research is needed to understand the real socio-economic impact of digital credit on low-income Kenyans.
“Digital borrowers tend to borrow frequently, and it is, therefore, important to build better mechanisms to monitor consumer protection and over-indebtedness,” it warns.