Digital Credit Providers have registered major growth in the past few months as demonstrated by Ksh13 billion ($10.1 million) loans disbursed to borrowers monthly.

The lenders say the growth is largely driven by the ease of access to digital platforms via mobile devices.

The sector has recorded a rise in accounts from 600,000 to 3.32 million over the past two years as more Kenyans tap loans to offset their basic needs against a backdrop of sluggish economic growth.

According to Kevin Mutiso, the chair of Digital Financial Services Association of Kenya (DFSAK), around 5.5 million Kenyans borrow over Ksh13 billion every month from 40 registered agencies.

While most borrowers take loans to spend on basic needs such as food, shelter and clothing, Mutiso noted that the sector has also supported Kenyans in refinancing their businesses and start-ups.

He disclosed that in recent years, the industry has facilitated access to over 230,000 smartphones through loan financing and funded more than 68 million motorbikes on Kenyan roads. He dismissed concerns regarding rising default rates, stating that the sector has adopted the use of artificial intelligence and big data from credit bureaus to identify high-risk borrowers.

Mutiso also noted that 84 per cent of Kenyans currently have access to financial services. He explained that the association is working with the Central Bank of Kenya (CBK) on new regulations to address sectoral challenges, including the issue of rogue lenders.

“We have engaged the CBK to review the minimum core capital requirement from Ksh20 million to Ksh50 million in order to streamline the sector and weed out rogue lenders,” Mutiso said.

Meanwhile, Sam Omukoko, Founder and Group Managing Director of Metropol Credit Bureau, stated that the sharing of credit information has significantly enhanced access to loans for millions of Kenyans.

Omukoko, however, expressed concern about the rise in non-performing loans in the sector, currently averaging 20 per cent. He attributed this trend to harsh economic conditions and the fact that many Kenyans borrow for consumption rather than investment or growth.

He said that Metropol has so far registered over 27 million accounts that have accessed credit and stressed the need for lenders to curate products that better suit the needs of their customers.

Fintech Alliance of Kenya Chair Ali Hussein raised concerns regarding the protection of borrowers’ data that has been exploited by unscrupulous players in the sector. Hussein also addressed the importance of promoting borrowers’ financial wellness after reports of high levels of indebtedness caused by access to multiple loan facilities.

According to Sacco Societies Regulatory Authority (SASRA) CEO David Sandaji over 120 SACCOs have rolled out digital products that allow Kenyans to access various loan facilities.

He, however, flagged cyber security risks stemming from the sharing of consumer data and urged agencies to implement built-in mechanisms to mitigate such threats.

• A Tell Media / KNA report / By Erastus Gichohi