Why Kenyans are taking digital loans – Tala
A report released by digital lending company Tala has revealed that the majority of its customers borrow for business-related reasons.
According to the report, most of the loans are for business needs, a trend that is more common among those whose main income is from a full-time job compared to business owners.
The figures show that 46 per cent of consumers are borrowing for business expenses this year, which is lower than the 55 per cent recorded last year.
Thirty-three per cent of consumers are deliberately borrowing for school fees (up from 28 per cent recorded in 2023), while 31 per cent are borrowing to add stock to their business.
The number of those borrowing for rent is 12 per cent, while those borrowing for fares or public transport is 7 per cent.
It also shows that consumers are increasingly using credit for medical expenses, providing an opportunity to work with health insurance providers and enrol customers on plans where they repay in monthly instalments.
Also read: Tala: Kenyan borrowers resort to skipping meals, cutting clothing expenses
The high cost of living has impacted on the ability to pay for basics such as rent, with rent increasingly cited as a reason for borrowing.
The report found that almost 6 in 10 consumers (57 per cent) use more than one digital lender, believed to be borrowing from one lender to pay another, in turn reducing their loan amount.
According to the report, some consumers are most concerned about ‘access’ and ‘repayment period’, continuing a trend seen over the years.
Loan collection tactics are increasingly determining which lenders consumers will borrow from, as they avoid rough-and-tumble lenders.
Another notable finding of the research was the savings culture among consumers, with 77 per cent of consumers saving either regularly or occasionally, which is down from 85 per cent last year.
One in three (30 per cent) of those who save are doing so more than six months ago.
Reasons for saving include creating financial independence, for emergencies and unforeseen expenses that may arise.
According to Tala’s Managing Director, Ms Annstella Mumbi, the payment of loans taken out is encouraging and the payment rate is around 97 per cent.