Small businesses have cut selling goods to consumers on credit by seven percentage points in the eight months to June this year due to increased consumer defaults and economic hardships.
Data published in the Finaccess MSE Tracker survey by the Central Bank of Kenya and partners reveal that 61.1 percent of small businesses had sold goods to customers on credit by the end of the first half of 2023.
The figure represents a fall from 68.5 percent of small establishments that had advanced credit facilities to consumers by the end of October last year.
The fall has been attributed to customer defaults that have been accelerated by economic hardships blamed on reduced real wages and declining disposable income as a result of increased statutory deductions.
The earlier version of the report reported that 40 percent of Kenyans with defaults had defaulted on credit from a shopkeeper.
The high cost of living as a result of global geo-political tensions, harsh weather patterns, and unstable political environment have reduced people’s spending power.
The survey that assesses small businesses' resilience and identifies challenges and opportunities faced by the establishment also revealed that despite female-owned enterprises advancing credit to many customers, male-owned businesses were advancing bigger credit in value terms compared to their counterparts.
The findings of the survey put the monthly median monthly outstanding customer credit by a male-owned establishment at Sh1,500 and Sh1,000 for a female-owned enterprise.
On average 63.8 percent of women-owned small businesses had advanced credit to the consumer while only 57.6 percent of male-owned establishments had advanced credit to consumers.
According to the report rural establishments were likely to advance credit to their customers in comparison to small businesses.
The biennial survey established that more than a third (37.4 percent) of consumers with debts to businesses owe the establishments between Sh1000 to Sh10,000.
More than a tenth (12.7 percent) of customers owe small businesses over Sh10,000, the survey acknowledged the importance of consumer credit to customers as a tool in promoting business growth.
The service enables establishments to retain customers and increase sales but hurts businesses in case of late repayments or even in cases of no repayments.
