Kenyan millennials are increasingly turning to mobile money loans to finance their needs, now holding 51.1% of total mobile loans issued in the first quarter of 2024, according to a new report by TransUnion. This demographic, aged between 25 and 45 years, borrowed a staggering Ksh 81.1 billion in mobile loans during the period, highlighting their role as a driving force in Kenya’s growing credit market.
The findings are part of the Kenya Market Analytics Report, published by the global information and insights company TransUnion, which reviewed Kenya’s credit landscape from January to March 2024. The report shows that millennials continue to dominate mobile loan issuance, shaping both the present and future trends in the country’s financial markets.
This article delves into the report’s key findings, offering insights into the evolving financial behaviors of Kenyan millennials, the state of mobile loans, and the overall credit landscape in the country.
The Rise of Millennials in Kenya’s Credit Market
Millennials now represent a significant share of Kenya’s mobile loan market. Out of the 15.83 million mobile loan accounts in the country during Q1 2024, 8 million accounts were active. Of these active accounts, millennials held 51.1%, underscoring their growing reliance on mobile money services for personal and business financial needs.
TransUnion notes that mobile loans have become the most common form of credit in Kenya, accounting for 52.8% of all active loan accounts, a trend driven largely by millennials. This statistic not only highlights the importance of mobile loans in providing financial inclusion but also reflects the increasing demand for quick, easily accessible credit among this demographic.
Kenya’s millennial generation has become an influential consumer segment, engaging more actively with various credit products. The report suggests that their evolving preferences are driving financial institutions to tailor their products and services accordingly. As these millennials grow older and move into positions of greater economic responsibility, their financial habits are set to continue shaping the future of Kenya’s credit markets.
Growth in Mobile Loans Amidst Increased Borrowing Limits
Mobile loans saw an observable growth in both the number of new accounts and the cumulative value of loans issued during the first quarter of 2024. TransUnion attributes this growth to the increased demand for mobile loans by millennials. The group’s greater financial participation has ensured that mobile loans continue to remain the preferred choice of credit among Kenyans.
During the period, 3.92 million new mobile loan accounts were created, representing an 11.02% increase compared to the fourth quarter of 2023. This increase is a testament to the growing penetration of mobile credit services in Kenya, particularly among younger, tech-savvy populations who prefer digital financial solutions over traditional banking services.
However, despite this growth, the report notes a reduction in average quarterly borrowing limits. The average borrowing limit per borrower decreased by 7.48%, from Ksh 16,860 in Q4 2023 to Ksh 15,600 in Q1 2024. This decline suggests a more cautious approach by both lenders and borrowers as they adapt to the current economic environment.
Digital lenders have been responding to increased risks and regulatory measures by lowering loan limits to mitigate potential defaults. Borrowers, on the other hand, are increasingly aware of the cost of borrowing, especially in a challenging economic climate characterized by inflation and rising interest rates.
Personal and Business Loans: Other Key Insights
Beyond mobile loans, millennials are also active participants in other forms of credit. The TransUnion report reveals that this group accounted for 49.6% of personal loans during the first quarter of 2024. Personal loans are a key financial tool for many Kenyans, allowing them to meet personal expenses such as education, healthcare, and home improvement.
Millennials also held 16.5% of asset finance loans during the same period. Asset finance enables individuals and businesses to acquire assets such as vehicles and machinery, often crucial for expanding business operations. The active participation of millennials in this area suggests their increasing role in entrepreneurship and business growth in Kenya.
However, business loans continue to dominate Kenya’s total loan portfolio, representing the largest share of the country’s loan book. Business loans accounted for 34.03% of the total loan stock, with Ksh 1.71 trillion worth of loans issued in Q1 2024. This substantial amount underscores the critical role of business financing in supporting Kenya’s economy, particularly in sectors such as agriculture, trade, and manufacturing.
Personal loans followed with Ksh 1.09 trillion, while mortgage loans and trade finance stood at Ksh 646.25 billion and Ksh 539.67 billion, respectively. The diversity in loan products highlights the versatility of Kenya’s credit market, which caters to both individuals and businesses seeking financial support for various needs.
Challenges Facing Kenya’s Credit Market: Non-Performing Loans
Despite the positive growth in loan issuance, Kenya’s credit market faces significant challenges, particularly in managing non-performing loans (NPLs). The report shows that NPLs increased by 20.8% year-on-year, reaching Ksh 613.1 billion in Q1 2024 compared to Ksh 507.7 billion in the same period last year.
This rise in NPLs reflects the broader economic challenges that borrowers face in repaying their loans. The cost of living in Kenya has been rising, driven by inflationary pressures, which have made it harder for many borrowers to meet their loan obligations. The increasing NPL levels are a cause for concern for financial institutions as they indicate heightened risk within the credit market.
The report also highlights that the banking sector continues to hold the largest share of loans issued, accounting for Ksh 4.84 trillion, which is 96.34% of the total loan stock. Microfinance lenders issued Ksh 78.90 billion in loans, while Saccos issued Ksh 53.52 billion. These institutions play a pivotal role in providing access to credit, particularly for individuals and businesses that may not qualify for traditional bank loans.
The Future of Kenya’s Credit Market: Financial Inclusion and Technological Advancements
Looking ahead, Kenya’s credit market is poised for further growth, driven by financial inclusion initiatives and technological advancements. TransUnion Kenya’s CEO, Morris Maina, emphasizes the importance of these factors in shaping the future of the country’s lending landscape.
Kenya has made significant strides in expanding access to credit, particularly through mobile money platforms that enable individuals and businesses to borrow and repay loans digitally. This has not only increased convenience for borrowers but also expanded financial access to previously underserved populations, particularly in rural areas.
Technological advancements, such as artificial intelligence and data analytics, are also transforming the credit industry by enabling lenders to better assess risk and offer more personalized loan products. This is especially important for millennials, whose financial behaviors and preferences continue to evolve as they navigate their careers and personal lives.
However, as the credit market grows, it will be essential for financial institutions to manage the risks associated with increased borrowing, particularly in light of rising NPLs. Lenders will need to adopt more stringent risk assessment measures while ensuring that they continue to provide inclusive and accessible credit products to Kenya’s diverse population.
The TransUnion report sheds light on the growing influence of Kenyan millennials in the country’s credit market. As this demographic continues to drive the demand for mobile loans and other credit products, financial institutions must adapt their offerings to meet the evolving needs of this increasingly important consumer segment.
While challenges such as rising non-performing loans persist, Kenya’s credit market remains dynamic and resilient, supported by advances in technology and ongoing efforts to expand financial inclusion. As millennials continue to shape the future of the country’s lending landscape, their role in the economy will only grow stronger, making them a key focus for lenders and policymakers alike.
