Micro lender, Jijenge Credit shrugs off inflation jitters, looks ahead

By Isaac OGANGA

Jijenge Credit has cast optimism on growing investor confidence, shrugging off inflation jitters over the economic fallout from the ongoing Russia-Ukraine war.

Its Chief executive officer (CEO) Peter Macharia while giving an update on the firm’s growth projections for the year, noted that the growing number of loan requests – mostly from his SME clients, offered a buoyant future for their financial survival amid slowing inflation rate.

Inflationary concerns dominated the airwaves for larger parts of last year, rising to a fever pitch in October when the overall inflation rate reached 9.6 percent, before slowing to 9.5 percent in November and 9.1 percent in December 2022 – the lowest since August when the figure stood at 8.5 percent.

Read: kenyas-inflation-slowed-for-the-second-consecutive-month-to-9-1-in-dec-2022/

Inflation is the gradual rise in prices throughout an economy. In Kenya for instance, economic experts use indexes like the Consumer Price Index (CPI), which measures the change in prices paid by consumers for housing, food, and fuel, or the personal consumption expenditures price index which measures how much prices change over time.

When inflation rises, the value of the Shilling is worth less than they were in the past. As a result, people have less purchasing power and need to increase their incomes to maintain the standard of living they are used to.

Moderate inflation is, however, likely to be one of the few positive factors in the second half of 2023, according to Macharia, despite a series of new tax increases in the 2022 Finance Act, which kicked in in January this year and are expected to hit Kenyan businesses and consumers.

Also read: jijenge-credit-expects-spike-in-consumer-credit-as-inflation-lingers/

Indeed, his arguments are backed by the December 202 S&P Global Kenya Purchasing Managers’ Index (PMI) which shows that Kenya’s services sector reported sharp growth in new business for the second straight month in December, helped by easing inflation, increased demand, and promising weather.

The PMI surged to 51.6 in December 2022 from 50.9 a month earlier. A reading of 50 on the index indicates no change in business activity levels.

The headline PMI further showed that new business rose at the sharpest rate since February, leading to accelerated increases in output and employment.

Firms saw costs increase to the smallest extent in a year during the period under review – with as many firms accelerating staff hiring for the second month on the bounce and the fastest seen since March last year.

In an economy that has produced one of the highest inflation rate in recent months, a last year study warned that Kenyans should expect to fall deeper into debt to keep up with the skyrocketing prices of basic commodities.

The prediction of the global micro-lending market expects the industry to accelerate by 12.8 percent to reach US$ 65.4 billion in 6 years – meaning – more loan providers will flock to the sector in a rush to meet the escalating call for cheap credit among borrowers.

Countries like Kenya will see their own market share swell as technological advancements and firmer guidelines gradually kick in, which will in turn provide alternative borrowing options for the distraught debtors.

Authored by tech firm, Report Linker which sampled industry trends, giving a regional outlook and forecast for 2022 to 2028, is also predicting that the rising use of mobile phones to access financial services through mobile credit and e-wallets will invigorate micro-lending business.

“The expansion of the micro-lending sector is also being driven by an elevation in the number of government programs that facilitate micro-lending in a variety of countries,” notes the study titled, Global Micro Lending Market Size, Share & Industry Trends Analysis Report.

Adding, “to meet their financial needs, these small enterprises will use unconventional loan service channels.”

Micro-lending is basically the process of giving small loans or microloans to proprietors of small businesses with shorter repayment periods – a practice that continues to grow popular among Kenyan borrowers, and which industry players expect to further develop.

According to Macharia, the micro-lending business, or simply microfinance, has taken center stage as a possible conduit for expanding financial services to unbanked portions of the population, as financial inclusion has emerged as a prominent governmental priority in the country.

“At the same time, several lenders’ actions have drawn more scrutiny and the need for more stringent regulation,” he notes, predicting further regulations by the central bank in the future until rogue players show clear intentions of a pullback.

The Central Bank of Kenya (CBK) had in September, listed a handful of digital lenders that had at the time met new rules that require all operating unregulated DCPs to apply for a license in a bid to weed out scoundrel operators.

“This is pursuant to Section 59(2) of the Central Bank of Kenya Act that requires all operating unregulated DCPs to apply for a license within six months of the publication or cease operations,” CBK said. Ceres Tech Limited, Getcash Capital Limited, Giando Africa Limited, Jijenge Credit Limited, Kweli Smart Solutions Limited, Mwanzo Credit Limited, MyWagepay Limited, Rewot Ciro Limited, Sevi Innovation Limited and Sokohela Limited became the first digital lending firms to meet those requirements.

Despite the challenges faced by the global economy due to the pandemic, Africa has experienced an influx of venture capital investment from around the world.

Between January 2022 and May 2022, African start-ups received $2.7 billion in funding exceeding the amount invested in the same period in 2021 by more than double with markets like Kenya attracting interest.

In today’s time, microcredit is seen more as a convenience when compared to a loan, and it has seen many young entrepreneurs opting for quick loans to boost their business as opposed to credit facilities with 3 or 5 years repayment obligations that come with a lot of paperwork.