Mobile loans continued to dominate Kenya’s credit landscape, representing 52.79 percent of all active loan accounts, with a total balance of Sh158.8 billion in the first quarter of 2024, according to TransUnion Kenya’s Q1 Market report. The report, released on Wednesday, revealed that 3.92 million new mobile loan accounts were opened, reflecting an 11.02 percent rise from the previous quarter.
However, the average borrowing limit per borrower declined by 7.48 percent from Sh16,860 to Sh15,600, signaling cautious behavior by both lenders and borrowers amid the economic climate. The report attributes the increase in mobile loan applications to a changing regulatory environment, with licensed FinTechs now contributing data to TransUnion. This enhanced data provides lenders with deeper insights, enabling them to make more informed credit decisions.
Low-value overdrafts (ODs), which are essential to accessible credit in Kenya, accounted for 32.81 percent of all active loan accounts, with over 9.84 million active accounts holding a balance of Sh34.69 billion by the end of Q1 2024.
There was a sharp 40.29 percent decrease in the number of new OD accounts opened, dropping from 8.97 million to 5.36 million, while the value of new low-value ODs fell by 32.57 percent to Sh4.5 billion. Interestingly, the average quarterly limit for ODs rose by 12.93 percent, from Sh745 to Sh818, although the number of unique borrowers dipped to 7.6 million from 8.02 million in the previous quarter.
High-value overdrafts, though comprising only 1.89 percent of all active loan accounts, maintained a substantial balance of Sh499.1 billion. However, the first quarter saw a reduction in the number of new high-value OD accounts by 25.3 percent, with the total value of these overdrafts decreasing by 17.6 percent to Sh29.36 billion, signaling tighter lending conditions.
The banking sector remained the backbone of Kenya’s credit market, controlling more than 96 percent of all loan balances, with 27.18 million active accounts. Although there was a slight dip in new account openings, the sector’s continued dominance highlighted its pivotal role in providing credit to consumers and businesses alike.
Asset finance, while representing only 0.32 percent of all active loan accounts in Q1 2024, held a significant balance of Sh200.8 billion, underscoring its ongoing importance to Kenya’s economy.
The first quarter of 2024 saw a significant 27.06 per cent drop from 6,660 accounts opened in the previous quarter to 4,860 accounts.
Additionally, the total value of new asset finance booked receded 22.78 per cent to Sh12.84 billion from Sh16.63 billion. Nevertheless, the average quarterly limit grew 5.86 per cent from Sh2.5 million to Sh2.64 million.
Millennials continued emergence as a driving force in credit, accounting for a substantial portion of the principal amounts across several loan categories, including mobile loans ( 51.1 per cent), personal loans ( 49.6 per cent), and asset finance ( 16.5 per cent).
This demographic’s strong presence underscores the need for financial institutions to innovate and provide products that cater to the unique preferences and behaviours of younger borrowers.
“Kenya has a dynamic and evolving lending market, with diverse credit products and solutions available that respond with agility to consumers’ and businesses’ needs. While some challenges remain, efforts towards extending financial inclusion even further, along with technological advancements, are shaping the country’s future credit market.”
Nevertheless, the report shows that the consumer lending market in Kenya reflected a mix of resilience and optimism in the period under review.
During the first quarter, the Central Bank of Kenya (CBK) raised the Central Bank Rate (CBR) to 13 per cent, up from 12.50 per cent in the previous quarter.
The Kenyan Shilling continued to depreciate against major international currencies during the same quarter, further influencing the local credit environment.
“Q1 2024 could be defined as a quarter of expectation. We anticipated a return of investor confidence and an increased appetite for lending. To this end, active accounts grew by a small margin of 0.2 per cent quarter-over-quarter (QoQ), but with a significant year-overyear (YoY) growth of 20 per cent. This reflects a cautious optimism among lenders as they started to regain confidence in the market,” says Morris Maina, CEO at TransUnion Kenya.
