In March 2020, when the government directed the temporary suspension of CRB listing to cushion Kenyans from the economic shocks of the pandemic, a new problem of over indebtedness was created in the digital lending market.

According to Kevin Mutiso, the chair of Digital Financial Services Association of Kenya (DFSAK), the move saw many Kenyans get leeway to borrow from multiple digital platforms as unregulated lenders couldn’t submit reports to the CRBs.

The net effect is that most digital lenders could not access the history of borrowers.

In an interview with NTV, Mutiso gave the example of a man who owes digital lenders slightly over Ksh1 million. The DFSAK official revealed that the man, who earns Ksh55,000 per month, took out loans from 52 digital platforms.

However, while the borrower was able to access the loans, he couldn’t repay the loans as the debt was far beyond his income.

Sharing customer borrowing data helps lenders ensure borrowers are able to meet their debt obligations before taking up a new loan. Ultimately,  this prevents any possibility of overindebtedness.

"We used to submit data as non-licensed lenders to the Credit Reference Bureau (CRB). When we were removed because the idea was to protect Kenyans, that meant that one could borrow from multiple lenders, and we could not see that someone had borrowed from multiple apps," he revealed.

"We got one guy, and his salary was Ksh55,000 per month. His total borrowing was Ksh1,071,000 from 52 apps." 

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Digital Loans in Kenya

As expected after the 2020 directive, negative listings on CRBs declined. The Financial Sector Deepening Kenya (FSD Kenya) in a report published in August 2024 detailed that there were 2,204,591 negative listings for individual borrowers in 2019, and this declined to 1,427,203 by the end of 2020.

The negative listings for 2021 dropped further to 955,303. There was a marginal increase in 2023 - with 1,136,649 negative listings, before the number once again dropped to 933,551. 

The data showed that men were more likely to default on loan repayments compared to women. For instance, in 2023, negative listings for men were 604,539 compared to 328,962 for women.

"For individual borrowers, the average principal amount for negatively listed loans was higher than for positively listed loans, with an average of Ksh30,560 for negatively listed loans.

"In each of the five years under review, the number of new negative records attributed to female borrowers was less than those that were attributed to male borrowers. On average, female borrowers contributed approximately 36% of the new negative listings between 2019-2023,” the report read in part.

A Borrowing Nation

On the other hand, owing to the current harsh economic times, loan repayments have become a challenge for Kenyans, even forcing some digital lenders to write off outstanding loans.

In some instances, some platforms under DFSAK, in 2021, decided to only lend to customers who had a history of making payments.

DFSAK data shows that Kenyans borrow Ksh500 million per day - a clear indication of the financial needs of Kenyans.

On average, 8 million Kenyans borrow loans from digital platforms per month.

Way Forward

Following the emerging trend where most borrowers are unable to repay their loans, the association created a framework to enable lenders to consolidate loans -  a move aimed to give borrowers more time to make repayments and avoid taking out other loans.

On the other hand he proposed for the government to work on regulations that will see CRBs have a centralised data which can be used by lenders.

"The association has been trying to create a debt-repayer framework- where you come into a portal, look at all the loans you have and then we fix it by consolidating them, and then you will have one treatment even as we increase the tenure.

"What we proposed is that we need to find a government-led solution so that all lenders can report to the bureau," Mutiso stated.