Mobile banking dominance may slow down as users opt for digital lending apps

M-Gas Mpesa

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.

Recently, increasing concerns have been raised on the cost of using some of the mobile banking and digital lending apps that EFG Hermes said would continue to impoverish the users as their disposable income decline and eventually slow down growth of these innovations.

According to the report, the bulk of the borrowings from these digital platforms are below Sh5,072 ($50), with many as low as Sh152 ($1.50).

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