Businesses & Financial News

Demand for digital credit set to rise

By Steve Umidha

Digital lending is projected to emerge stronger in the post pandemic era, according to industry trends by the Digital Lenders Association of Kenya (DLAK).

The association in its Status of Digital Lending in Kenya survey is attributing the likely surge in the usage of digital credit to the growing number of Kenyans choosing to use such platforms for their daily transactions.

Further DLAK expects the 92 percent of Kenyans who don’t see high interest rates charged by digital lenders as a factor, to increase in the post Coronavirus period. It is estimated that just 8 percent of Kenyans consider high interest charged as a factor when borrowing.

“Twelve percent of the respondents said low interest rates charged by some of the digital credit providers is their motivating factor to the continued usage of these platforms; KCB M-Pesa and M-Shwari were some of the providers mentioned to have low interest rates,” reads in part the survey findings.

According to a report by FSD Kenya, the country has experienced and explosive growth in digital credit services in since the launch of M-Shwari in 2012.

The report estimates that 35 percent of Kenyan digital borrowers use digital credit to meet day-to-day household needs while 37 percent borrow for business reasons – a trend digital lending firms are hopeful will sustain even after the virus is contained amid successful inoculation drive by the Ministry of health.

The FSD Kenya 2021 report shows on digital economy apps usage in Kenya majorly depends on how convenient and easy to use the app is, loan disbursement period, and interest rates.

There are a total of 49 digital credit providers operating in Kenya with M-Shwari accounting for 29 percent of the local market share, followed by KCB M-Pesa at 12 percent, then Equity Eazzy, Tala and MCo-op Cash at 4 percent, 1.8 percent and 1.3 percent respectively.

The sector is also expected to witness an increase in micro-credit especially among small traders who prefer such apps for their regular business transactions with customers, according to the Chief executive of digital lending firm Duncan Motanya.

“We are already seeing adjustments in the industry, which give us hope as operators in this space. Availability, affordability and convenience in terms of repayment of such loans will play a crucial role in the sector’s growth,” said Motanya in an interview.

His observation are being backed by the report’s finding which estimates that 70 percent of digital lending platform users will likely continue using the platforms with users aged above 65 years expected to contribute to that growth while those aged between 35 and 39 years unsure to continue using such platforms in the future.

And for Kenyan companies that will lend digitally, technology will act as a stimulus for innovation and risk mitigation in the post Covid-19, according to Peter Macharia – the Chief executive of micro lender Jijenge Credit, who believes the trend will remain popular among salaried clientele.

Digital credit uptake is highest among Kenyans employed in formal sector, mainly due to the repayment surety based on regular monthly salary.

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