- TransUnion survey shows four in 10 (41%) of Kenyan consumers reported a decrease in income over the past three months.
- A similar number or 42% of Kenyan consumers anticipate being unable to pay their current bills and loans in full.
- About 55% of Kenyan consumers plan to make further cuts to their discretionary spending. What’s more, 47% expect a decrease in large purchases such as cars.
A new survey by TransUnion has revealed a mixed financial outlook for Kenyan consumers in the second quarter of 2023. The research, presented at its annual Financial Services summit in Nairobi, found that while eight in 10 (79 per cent) expect their household incomes to increase in the coming year, four in 10 (41 per cent) reported a decrease in income over the past three months. A similar number or 42 per cent anticipate being unable to pay their current bills and loans in full.
According to TransUnion’s Consumer Pulse Study, one of the significant factors contributing to the decrease in household income was job loss. About 30 per cent of consumers said that someone in their household lost their job over the past month. Interestingly, this was an eight-percentage point increase from the previous year. Other factors impacting income included wage or salary reductions and declining small business revenue.
Many consumers have been forced to adjust their household budgets in response to these challenges. The survey shows 62 per cent have cut back on discretionary spending over the past three months, said Morris Maina, CEO of TransUnion Kenya.
Inflation increasing cost burden for Kenyan consumers
According to the Kenya National Bureau of Statistics, Kenya’s inflation rate rose to 6.8 per cent in September 2023, up from 6.7 per cent in August. This is expected to increase some cost burdens for consumers, particularly around food prices. GDP grew by 5.4% in the second quarter, a slight increase from the previous quarter. The growth was primarily due to a rebound in the agricultural sector as Kenya recovers from its worst drought in four decades.
Looking ahead, Kenyan consumers are bracing for further financial strain. A significant 39 per cent of consumers expect an increase in bills and loans. Another 44 per cent expect their in-store and online shopping to decrease. In addition, 55 per cent of Kenyan consumers plan to make further cuts to their discretionary spending. What’s more, 47 per cent expect a decrease in large purchases such as appliances and cars.
The survey also highlighted a decline in access to credit and consumer confidence in the credit market. Nearly all consumers (98 per cent) believe access to credit is crucial. However, only one third (33 per cent) feel they have adequate access to credit. This is a 12-percentage point drop from the previous year.
Managing financial choices
Fewer people are applying for credit, with 55 per cent of consumers intending to apply for new credit or refinance within the next year. In comparison, this is a five-percentage point decrease from the previous year. Millennials are particularly cautious, with only 49 per cent intending to take on new credit, down from 60 per cent last year. Despite this, mobile loans and ‘buy now, pay later’ (BNPL) services are gaining popularity among prospective borrowers. An estimated 28 per cent of consumers are planning to explore BNPL, the study shows.
Kenyan consumers continue to embrace digital platforms. Approximately 32 per cent of respondents reported that at least half of their transactions are conducted online, similar to the previous year.
Most consumers (75 per cent) believe monitoring their credit is very or extremely important. However, there has been a decline in the frequency with which consumers monitor their credit reports. Only about 25 per cent of those surveyed are checking their reports monthly, compared to 33 per cent in 2022. Most respondents (57 per cent) believed their credit scores would improve if businesses used alternative data sets not included on a standard credit report, like rental payments, gym membership dues, short-term loan histories, and BNPL products.
Identity risks and usage
Across the industry, digital fraud is on the rise. More than seven in 10 respondents (73 per cent) reported being the target of fraud schemes in the past three months. An additional 8 per cent were targeted and fell victim. The most common scams were money or gift card scams at 44 per cent. Vishing, fraudulent phone calls designed to trick you into revealing personal data accounted for 40 per cent of fraud cases. At the same time, smishing, fraudulent text messages with the same aim was reported at 40 per cent.
Concerns about sharing personal information have risen, with 94 per cent of consumers expressing worry. This is a seven-percentage point increase from the previous year. The primary concern cited was the invasion of privacy (81 per cent), followed by fear of identity theft (68 per cent). These findings underscore the need for stringent security measures and consumer education about data protection to maintain trust in digital platforms.
“Overall, it’s clear that consumers are increasingly aware of the risks associated with digital fraud. With rampant scams, consumers are cautious about sharing personal information, fearing privacy invasion and identity theft. This indicates a significant need for stronger security measures and robust fraud prevention strategies in the digital space,” said Maina.