The number of Kenyans listed with Credit Reference Bureaus (CRB) has hit 3.2 million, a jump from the 2.7 million who were listed at the bureaus last year.
The listing with the CRB represents a 12 per cent rise in non-performing loans in the country up from 9.5 per cent in the year 2017.
Of the 2.7 million who were listed with the CRB in 2017, more than 400,000 people have been blacklisted for defaulting on loans of Sh200 and below.
A total of 16.6 per cent of digital borrowers take up one loan to pay another, ensnaring them in a vicious cycle.
Digital borrowers asking for low amounts (such as Sh200) were found to incur high costs to the point where when paying the principal and interest, they were likely to be in a worse off position than they were before the loan.
According to data from the Central Bank of Kenya (CBK), most of these defaults have been fueled by mobile digital borrowing and defaults.
Last month, President Uhuru Kenyatta directed that Kenyans who failed to pay their dues by April 1 should not be listed with the CRB.
The directive did not cover at least 3 million Kenyans listed with the CRB.
Kenyatta said he had issued a "temporary suspension of the listing with Credit Reference Bureaus of any person, Micro, Small and Medium Enterprises (MSMES) and corporate entities whose loan account falls overdue or is in arrears, effective April 1, 2020."
The millions on CRB list reflect the disparity in the Kenyan economy and casts doubt on the government figures of a growing economy.
With the economy taking a beating from the ongoing coronavirus pandemic, it now remains to be seen how borrowers and financial institutions will be affected, and whether the number of defaulters will be higher post Covid-19.
The president on March 25 proposed temporary suspension of the law requiring loan defaulters to be listed with the CRBs as part of measures to cushion workers and businesses from effects of the virus.
On Monday, members of the Digital Lenders Association (DLAK) also said they have waived late repayment fees for borrowers as part of the measures to support customers during these tough times.
DLAK, which represents 17 major digital lenders in the country, said the move was to cushion majority of clients who are under distress due to an aconomic slowdown which has affected their regular income flow.
In a statement, the association advised their customers to seek more detailed information on the specific aspects of the waiver from their respective providers.
Kenya has 158 confirmed coronavirus cases, with six deaths related to the virus.