- Kenyan consumers defy 8-year high Lending Rate as 60 per cent set sights on borrowing over the next year
- Nearly all consumers (99 per cent) deem access to credit as essential for financial inclusion and economic participation
- Digital platform usage is increasing, with 42 per cent of Kenyans conducting at least half of their transactions online.
Kenyan households experienced a modest financial rebound in the second quarter of 2024, largely driven by new business ventures, enhanced debt management, and less impact from job losses. This is according to the second quarter Consumer Pulse Study by insights company TransUnion.
According to the study, 34 per cent of consumers saw an increase in income in the last three months, led by gains among the Gen Z (18–26 years old) and Millennial (27–42 years old) groups.
While a similar number (36 per cent) of consumers also reported a decrease in income over the last three months, optimism about future income is high with 85 per cent of consumers expecting an increase over the next 12 months.
This positive outlook is particularly prevalent among younger generations. Consumers’ ability to pay their bills in full increased significantly, with 64 per cent saying that they would be able to do so in Q2 2024, while those unable to pay decreased by 6 percentage points to 36 per cent compared to the same time last year.
TransUnion Kenya CEO Morris Maina, said that 51 per cent of Kenyan consumers have been resolute in tackling their outstanding and opted to pay partial amounts if they were unable to settle them in full, and 33 per cent of consumers are prepared to utilise savings to service their debts.
“The possible easing of inflationary pressures in the near future may lead to growth in disposable income, which could in turn support household consumption in 2024.”
“This may be especially true if the expected income increases come to bear and consumers see fit to increase their discretionary spending, and reinstate the digital services, memberships and subscriptions that were cancelled during the quarter,” said Maina.
In the three months under review, consumers cut back on non-essential expenditure, with 56 per cent of households, particularly Gen X (43–58 years old), reporting reduced discretionary spending.
Across all generations, 49 per cent of consumers are expecting to reduce discretionary spending in the next three months and 42 per cent anticipate cutting back on large purchases like appliances and vehicles.
However, consumers plan to direct their increased disposable income towards retirement funds (48 per cent), bills and loans (41 per cent), and digital services (38 per cent).
An estimated 41 per cent of households, are boosting their emergency fund contributions to guard against potential payment shocks.
This is higher than the 30 per cent that was reported in the second quarter of 2023. The survey further notes that financial inclusion in Kenya is on the rise, driven by mobile technologies and digital payments.
However, while nearly all consumers (99 per cent) see access to credit as essential, only 36 per cent feel they have sufficient access, a slight improvement from 33 per cent a year ago.
Read Also: Demand for Credit Remains High in Kenya, Driven by Financially-Stressed Consumers
Kenyan Consumers Defy 8-Year High Lending Rate
Millennials (55 per cent) and Gen X (58 per cent) are most likely to seek new personal loans, and 38 per cent of respondents are considering new mobile loans.
Interest in ‘buy now, pay later’ (BNPL) services has grown, with 33 per cent of consumers planning to explore this option, up five percentage points from Q2 last year.
Despite the demand, 66 per cent of consumers who intended to apply for credit ultimately chose not to, primarily due to high costs (41 per cent). The recent increase in the policy rate has driven commercial bank lending rates to an eight-year high.
Monitoring credit status has emerged as a crucial tool for Kenyan consumers, with 91 per cent considering it important. The frequency of credit report checks has increased, with 59 per cent reviewing their reports at least monthly.
Additionally, 60 per cent believe that including alternative data, such as rental payments and BNPL loans, could improve their credit scores.
In Q2 2024, 72 per cent of consumers reported being targeted by digital fraud schemes but avoided falling victim, while 8 per cent fell victim.
Vishing (45 per cent, up from 40 per cent in Q2 2023), smishing (44 per cent, up from 40 per cent), and phishing (36 per cent, up from 33 per cent) scams are on the rise, though awareness of these schemes is high.
Consumer concern about sharing personal information remains significant at 91 per cent, down slightly from 94 per cent in Q2 2023.
Concerns include invasion of privacy (81 per cent) and fear of identity theft (67 per cent), highlighting the need for robust security measures and consumer education to maintain trust in digital platforms and encourage greater use of digital services.
Read Also: Kenyan consumers optimistic, but financial worries weigh heavy
