Borrowing from family and friends, long considered a financial safety net for many households, is on the decline amid a soft economy and growing preference for savings and credit cooperative societies (saccos) and government debt, such as the Hustler Fund.
Digital lender Tala’s latest annual survey on Kenyans’ borrowing habits, dubbed the Money March report, reveals a drop in borrowing within social circles, as loans from the government and cooperative societies gained traction.
The survey that polled some 985 borrowers across the country revealed that about 24 percent now borrow from friends and family, down from 26 percent last year, as reliance on multiple lenders increased.
Experts at Tala attribute the drop to widening economic pressures across the country, constraining liquidity across the board and limiting people from lending to their social circles, as has been the norm in Kenya.
“There’s been a big hit in the economic conditions. People have less disposable income to lend, so that’s the first reason why we’re seeing that drop in borrowing from friends and family,” said Annstella Mumbi, General Manager at Tala Kenya.
The drop in family borrowing was offset by marginal increases in borrowing from saccos, which rose from 21 percent of borrowers last year to 24 percent; and from the government through avenues such as Hustler Fund, which rose to four percent from three percent last year.
According to Ms Mumbi, the growing access to digital loans as more firms get licensed by the Central Bank of Kenya, also contributed to the drop in social borrowing, and points to a growth of formal credit.
“That increase in access, as well, is bringing more people into the fold, who were initially borrowing from family and friends and the shopkeeper, because they didn’t have access to formal credit,” she told the Business Daily.
The survey also revealed that for the first time in four years, Kenyans increased their reliance on multiple lenders per month, pointing to growing use of credit as access and options increased.
Borrowers using on 2 to 3 lenders per month had consistently declined from 47 percent in 2023 to 41 percent last year, but has this year risen marginally to 42 percent, as those relying on a single lender dropped to 51 percent from 52 percent.
While exploring more digital lenders, the amount borrowed by Kenyans generally declined compared to last year, as nearly half (47 percent) now say they’re borrowing less than they did six months ago. Last year, only 36 percent said they’d cut their borrowing.
The reasons for borrowing have remained almost constant over the last 3 years, with business restocking, school fees, daily expenses, and medical expenses topping the chart.
