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Digital financing to boost Kenya’s GDP

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Digital financial inclusion will enhance country’s economic growth – which is predicted to grow by 6 per cent this year according to the latest African Development Bank (AfDB) figures. Kenya ranks favorably in the continent as a pioneer leader in financial inclusion.

Economists and industry observers believe that small and medium enterprises (SMEs) who are the key beneficiaries of mobile loans will continue to play a fundamental role in the growth of the East Africa’s biggest economy which has grown by an average of more than 5 per cent in the last five years.

Duncun Motanya, the chief executive of Zenka, a Kenyan-based mobile money lender, says that mobile loans continue to make a difference to the underserved by banks and believes that, this trend is likely to carry on.

“These lending institutions have helped in bridging the gap in offering much needed credit to small business people who could not access credit because they lacked the credit score or banking history,” says Motanya, adding that mobile lending apps will continue to provide a respite to majority of small traders.

According to the 2019 FinAccess Household Survey, put together in collaboration with the Central Bank of Kenya, Kenyan National Bureau of Statistics and FSD Kenya, 82.9 per cent of the adult population has access to at least one financial product.

Digital lending will be a big changer this year for small traders owing to positive regulatory environment and progressive Government initiatives as well as tough conditions set by commercial banks which has seen small businesses turn to informal credit channels.

“I expect to see the momentum carry on this year because of several factors especially regulatory reforms and the fact that more Kenyans have embraced this form digital payments because of fast payments,” says Peter Macharia, the Chief executive officer of Jijenge Credit Limited, a local digital lender.

Over the last few years, the advent of Kenyan fintech with regards to digital lending, has been a game changer for the MSMEs in the last few years. However, Mr. Macharia says a huge chunk of the market with opportunity for digital lending is still left untapped and could attract more players with both local and foreign presence.

According to a study on SMEs Competitiveness Report 2019 by the International Trade Centre, Ministry of Trade and Kenya National Chamber of Commerce and Industry (KNCCI) released in September last year shows that 33 per cent small traders avoid commercial bank loans despite their need for credit.

SMEs represented the high growth in employment creation having scooped 83.6 percent of the 846,000 jobs created across 2018 as per provisional data from the Kenya National Bureau of Statistics (KEBS).

One such beneficiary is Lucy Wanjiru, a merchant in wedding gowns merchandize for instance, operates her business using up to three mobile loans for credit access for urgent orders to her clients. She imports her products from China.

“For me it’s mostly for urgent orders that I am very certain are deliver and receive payment,” adding that, “I borrow between Sh 30,000-50,000, depending on the orders,” cautioning she only takes the loans for quick orders, but not for the stock, unless “the supplier is running those quick sales and I have to order in a hurry.”

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