Nairobi — The Kenyan economy showed resilience by the end of 2023, recording growth in gross domestic product (GDP), which increased to 5.9 percent in the third quarter of last year compared to 4.3 percent in the same period in 2022.
The latest data from TransUnion Kenya, a global information and insights company, on the Kenya Credit Industry Insights Report showed a state of flux in the credit market, shaped by macroeconomic shifts, consumer behavior changes, and technological advancements.
The report indicated that the Central Bank of Kenya's (CBK's) move to hike the Central Bank Rate (CBR) to 12.50 percent from 10.50 percent in December 2023 impacted the cost of loans and Kenyans' repayment capacity.
It was also noted that the depreciation of the Kenyan shilling against major international currencies put further pressure on the local economic and credit landscape.
Morris Maina, CEO at TransUnion Kenya, revealed that mobile loans, the most common form of credit, exhibited a pullback, signaling cautious borrowing that led to a decrease in both the issuance of new accounts and cumulative value.
"In Q4 2023, Mobile loans accounted for 50.61 percent of all active loan accounts in Kenya holding a collective balance of Sh.148.7 billion, but the number of new mobile loans and their value decreased by 20.5 percent and 9.5 percent respectively from Q1 2023 to Q4 2023," said Maina, CEO at TransUnion Kenya.
He stated that this contraction mirrors the cautious stance of consumers amidst a fluctuating economic environment.
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The report showed the banking sector remained the backbone of the credit industry with the highest loan balances, accounting for 96.16 percent of the market with 27.03 million active accounts.
However, the microfinance sector (741.9K active accounts constituting 0.81 percent), FinTech (1.43 million at 0.22 percent), and Savings and Credit Cooperatives (SACCOs) (336.8k at 1.01 percent) reflected the evolving credit ecosystem across the country.
Additionally, low-value overdrafts continued to underpin accessible credit, with high-value overdrafts showing a shift towards higher limits and balances.
"At more than 10.44 million loan accounts, low value overdrafts (less than Sh.6,000 of the principal amount) are the lifeblood of accessible credit in the Kenyan market. These represent a significant 34.89 percent of all active loan accounts, holding a balance of Sh13.06 billion," the report noted.
"This slight increase may suggest a more nuanced shift in the financial landscape or even a strategic loan structuring by lenders to accommodate evolving market needs," it added.
The data showed Millennials continue to engage actively with a variety of loan products, shaping current and credit trends in the country.
"Their distinct financial behaviours and preferences are shaping the way we think about and offer credit products. It remains imperative that we continue to innovate and tailor our offerings to meet the unique demands of this vital demographic," said Maina, CEO at TransUnion Kenya.
