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Jijenge Credit expects spike in consumer credit as inflation lingers

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A growing number of consumers are pursuing personal loans to make ends meet, as high inflation and rising interests continue to put the squeeze on household finances.

Predictions by Nairobi – based micro lending firm, Jijenge Credit Ltd indicate that the tendency will bear for the rest of the year as several lenders continue to record an increased demand for personal, household and business loans, defying the rising cost of credit amid the tightening of financial conditions.

“From our observation, particularly in the second and third tier finance market, if the money is required to meet a house commitment or a rental commitment, or a repayment on a car, then consumers will go out to bridge that gap. That has been the case since September, we expect this to withstand,” offered Peter Macharia – the firm’s Chief executive.

Activity in the country’s services sector increased at a marginal pace in October, according to business executives who took part in the Service Sector Outlook Survey, blaming the slow growth on high standard of living prompted by high inflationary burdens.

The annual inflation rate in the country accelerated for the eighth straight month to 9.6 percent in October from 9.2 percent a month earlier and above market forecasts of 9.5 percent.

It marked the steepest inflation rate since May of 2017, breaching the upper limit of the central bank’s target range of between 2.5 percent and 7.5 percent for the fifth month.

Despite the rising inflation rate, Mr. Macharia noted that most lending firms had indeed registered increased demand for credit, this also despite CBK raising its policy rate to 8.25 percent in September, a move aimed at taming soaring inflation rates by reducing the appetite for loans by individuals and institutions.

“The September decision by CBK in raising the base lending rate has indeed triggered some noticeable effect, but not significant enough to counter the effects of the implementation of risk-based pricing,” argued Macharia, further noting that the appetite for loans currently seen, will only continue to rise because the expense incurred in seeking them has become a secondary consideration.

While raising the benchmark rate, the Monetary Policy Committee (MPC) faulted the rising inflation, global risks and their impact on the domestic economy and called for tightening of the monetary policy.

The inflation — a measure of annual changes in the cost of living— hit 8.5 percent in August from 8.3 percent in July, according to Kenya National Bureau of Statistics. The MPC has been raising the rate to stem rising inflation and stabilize the shilling which has surpassed the 120 – mark against the US dollar.

Jijenge Credit is heavily involved in the disbursements of quick logbook loans, salary check-off bid bonds and salary check-off loans. Most of the firm’s logbook loans customers are people looking for emergency loans to sort out situations that require quick credit.

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