Mobiles now the largest source of soft loans


Mobile phone loans have overtaken friends and family to become the largest source of loans for most Kenyans. FILE PHOTO | NMG

Mobile phone loans have overtaken friends and family to become the largest source of loans for most Kenyans, a new survey has shown, citing convenience and speed in accessing them as the reason for their increasing popularity among consumers.

This is the first time mobile loans have overtaken friends as the top source of finance for Kenyans, having leapfrogged family members last year.

The findings of the survey released on Thursday by Consumer Insight Africa, a Nairobi-based quantitative research firm, showed that nearly half of Kenyans rely on the mobile phone loans rather than friends and family for cash.

However, family and friends still trumped informal groups, known as "chamas" as a source of loans.

The research shows popularity of mobile loans has grown from 38 percent in 2018 and 33 percent in 2017 when similar socio-economic surveys were conducted.

The findings were based on face-to-face interviews with 3,703 persons in 16 counties between January and March.

“The findings are a reflection of where people borrow when they need money generally whether for emergency purposes or otherwise,” said Ruth Ruigu, the research director at Consumer Insight.

“What we found is that convenience and speed is worth the cost (for mobile loans). There’s also the aspect of maintaining your privacy and protecting your dignity.”

The proportion of persons borrowing from friends has dropped to 40 percent in 2019, from 49 percent last year.

This could also suggest that Kenyans are moving from informal methods of borrowing to more formal ones since mobile phone loans are supported by banks and other lending institutions, such as Saccos. Apps such as Branch International, Tala Kenya and the Opera Group-owned OKash have also increased access to digital loans.

The growing demand for the instant low-value unsecured mobile loans has increasingly seen firms venture into the mobile micro-lending segment, which is largely not regulated.

In the first five months of the year, mobile deals stood at Sh1.79 trillion from Sh1.60 trillion a year ago.

Interestingly, although Kenyans go for mobile loans, they still prefer to transact in cash.

"The study confirms that 77 percent of those interviewed say that they primarily use cash for their daily transactions. Even so, there is evidence of a slow-but-steady move towards a cashless economy," said Ms Ruigu.

Besides the findings on borrowing and spending, the Wakenya 2019 survey also found that health was one thing Kenyans valued most at the rate of 54 percent of the respondents, followed by family (46), education (42) and comfortable life (40).