Top mobile banking platform M-Pesa continues to dominate digital payments. FILE PHOTO | NMG The growing dominance of mobile banking may slow down amid low employment rates and high costs of living which have pushed more Kenyans to rely on digital lending apps to make ends meet, a new report shows.
The report by Egyptian investment bank, EFG Hermes, said the surge in digital lending apps has been witnessed over the years as more Kenyans sought to supplement their incomes following a spiral in the cost of living.
This is likely to threaten the mobile banking revolution.
While more mobile banking and digital loan apps were launched in 2016 and have helped increase household access to credit by almost three times to 81.7 percent in 2019 from the recent low (32.4 percent) in 2013, the report states that the explosion in credit accessibility has not been matched with job creation.
Subsequently, the cost of living and Kenyans’ inability to live by what they earn has seen the sprouting of digital lending apps, which continue to take advantage of the cost of living pressures.
According to the bank, the need for credit among Kenyans has increased relative to salaries, ranging from Sh9,130 ($90) to Sh90,899 ($896) per month, funding the appetite for credit and resulting in easy availability of quick loans.
The digital loan apps are estimated to be more than 100, according to Financial Sector Deepening report released in November 2019 by FSD Kenya and Central Bank of Kenya.
Top mobile banking platform M-Pesa continues to dominate digital payments, holding a share at the digital credit space with a number of banks and non-bank lenders.
Since December 2007 with launch of M-Pesa, mobile money subscribers in Kenya have increased from 1.3 million to 58.4 million in December 2019, meaning that an average Kenyan holds two mobile money accounts.
The value of transactions increased from Sh14.8 billion to Sh4.35 trillion over the period, representing about 44 percent of Kenya’s 2019 GDP estimated at Sh9.7 trillion.
The total balance in mobile money accounts at September 2019 was Sh604 billion, 17 percent of banking system deposits.“While these numbers are dazzling, this note takes a look at the issues that will affect the sector going forward such as low formal employment, rising cost of living and the cost burden digital lenders are putting on households, mainly due to financial illiteracy,’’ EFG Hermes stated.“Now is the time for the government to step in to […]
