Kenya’s Lending Landscape Sees Surge In Mobile Loans As Overdrafts And Asset Finance Tightens – TransUnion
Kenya’s consumer lending market, according to TransUnion Kenya’s Q1 2024 Market Analytics Report, reflected a mix of resilience and optimism in the first quarter of this year. This growth has been driven by lenders who, equipped with deeper insights and advanced tools, have adapted to the evolving regulatory environment. As a result, they are now better positioned to meet the demands of a dynamic and evolving consumer market.
During the first quarter, the Central Bank of Kenya (CBK) raised the Central Bank Rate (CBR) to 13.0 per cent, up from 12.50 per cent in the previous quarter. The Kenyan Shilling (KES) continued depreciating 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-over-year (YoY) growth of 20 per cent. This reflects a cautious optimism among lenders as they started to regain confidence in the market,” says CEO at TransUnion Kenya Morris Maina.
Kenya’s continued growth in mobile loans.
Mobile loans remained the most common form of credit in Kenya, accounting for 52.79 per cent of all active loan accounts with a total balance of KES 158.8B. The first quarter of 2024 saw the opening of 3.92M new mobile loan accounts, an 11.02 per cent increase from the previous quarter. However, the average quarterly borrowing limit per borrower decreased by 7.48 per cent from KES 16.86K to KES 15.6K, indicating a measured approach by both lenders and borrowers in the first quarter’s economic climate.
The evolving regulatory environment contributed to the increase in people applying for mobile loans, with licensed FinTechs now submitting data to TransUnion. This results in better insights into the overall market and consumer health, enabling lenders to make better-informed decisions on credit applications.
Low-value overdrafts (ODs)—the lifeblood of accessible credit in the Kenyan market—represented a significant 32.81 per cent of all active loan accounts, with over 9.84M active accounts holding a balance of KES 34.69B at the end of Q1 2024. The first quarter 2024 dip in low-value ODs originations saw the volume of new accounts opened retract to 5.36M, a 40.29 per cent decrease from the 8.97M in the previous quarter.
There was also a 32.57 per cent drop in the value of new, low-value ODs booked to KES 4.5B from the previous quarter’s KES 6.68B. The average quarterly limit increased by 12.93 per cent from KES 745 to KES 818.
The quarter marked a contraction in unique borrowers of low-value ODs to approximately 7.60M from 8.02M (-5.14%) the previous quarter.
High-value overdrafts reflected a tightening of credit.
While comprising a small percentage (1.89%) of all active loan accounts, high-value ODs held a significant balance of KES 499.1B. The first quarter of 2024 saw a 25.3 per cent reduction in new high-value overdraft accounts, with these overdrafts decreasing by 17.55 per cent to KES 29.36B. This trend suggests tighter credit conditions and more selective lending practices in this segment.
The banking sector remained the backbone of Kenya’s credit market, holding more than 96 per cent of all loan balances and accounting for 27.18M active accounts. Although the number of new accounts opened slightly declined, the sector’s dominance underscores its critical role in providing credit to both consumers and businesses.
Increased new asset finance limits
Asset finance is a niche product and comprised 0.32 per cent of all active loan accounts in Q1 2024 — just 97.41K — but it made up a balance of KES 200.77B and continued to play a critical role in the economy. The first quarter of 2024 saw a significant 27.06 per cent drop from 6.66K accounts opened in the previous quarter to 4.86K accounts. Additionally, the total value of new asset finance booked receded 22.78 per cent to KES 12.84B from KES 16.63B. Nevertheless, the average quarterly limit grew 5.86 per centyfrom KES 2.5M to KES 2.64M.
Millennials continued to emerge as a driving force in credit.
Millennials (25-45 years old) accounted for a substantial portion of the principal amounts across several loan categories, including mobile loans (51.1%), personal loans (49.6%), and asset finance (16.5%). This demographic’s strong presence underscores the need for financial institutions to innovate and provide products that cater to younger borrowers’ unique preferences and behaviours.
“Kenya has a dynamic and evolving lending market, with diverse credit products and solutions available that respond with agility to consumers’ and businesses’ needs,” says Maina. “While some challenges remain, efforts towards extending financial inclusion even further, along with technological advancements, are shaping the country’s future credit market.”
