Kenyans seek financial assistance from online lenders, primarily to pay for medical expenses.
The difficult economic times have led to an increase in the number of Kenyans applying for loans from online lenders over the past two years. A significant portion of the loans are being used to pay for medical expenses, according to the Digital Financial Services Association of Kenya (DFSAK).
This occurred as the group demanded that banks, Saccos and online lenders all have equal opportunities in the industry.
Non-Performing Loans (NPLs) increased by more than 16 percent as of June 2024, according to information released at the current National Credit Market Convention at Lake Naivasha Resort.
Despite the difficult economic times, the sector had experienced growth as more Kenyans sought financial assistance, according to DFSAK Chairman Kevin Mutiso.
On the sidelines of the meeting, Mutiso told the media that digital lenders were currently giving out more than Ksh. 10 billion in loans each month.
Noting that 43% of the loans were being used to support businesses, he said they were eager to increase this to 60% within two years. Mutiso also pointed out that there were no digital lenders in 2010 but that there are now over 400, and the industry has grown significantly as more people look for assistance to shield their families from the difficult economic times.
He did, however, voice his displeasure with the proposed change to the laws governing digital lending, pointing out that it was unjust to these lenders.
“The bill to amend the tax law is currently in Parliament. We are working to find solutions for some of our tax-related problems. As financial institutions, we are subjected to discriminatory treatment. The product offered by the other financial institutions is identical, but their tax rates differ,” he said. “In addition, we are not permitted to make right-offs in our allotted funds, and naturally, if someone does not reimburse you, we have suffered losses.”
Gideon Kipyakwai, the CEO of Metropol CRB, acknowledged that the government’s inability to pay outstanding bills was contributing to an increase in SMEs’ default cases. Kipyakwai stated that the industry had suffered due to the high interest rates charged by lenders and the growing percentage of non-performing loans (NPLs), which was more than 16 percent.
“Loan losses are the reason why people are taking out loans at extremely high interest rates,” he stated.
The financial industry is facing difficulties related to cybersecurity threats, data privacy, digital transformation, and multi-regulatory compliance, according to Kipyakwai. “Financial institutions are eager to use data and analytics to learn more about the preferences of both new and existing customers in response to emerging cultural shifts despite these obstacles,” he continued.
Additionally, he stated that the Hustler Fund has been helpful in helping millions of people nationwide during a period when consumer cash flow is low and purchasing power has diminished.
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