Kenyans turn to mobile loans as Covid stings domestic budgets

Mobile loans

What you need to know:

  • Spending habits, according to Boston Consulting Group's Consumer Sentiments Survey conducted in April and May this year, have also changed accordingly.
  • They were business closures, loss of jobs and increased poverty that created a new wave of psychological, financial panic and fear.

Kenyans have turned to digital loans to offset home budgets as the coronavirus scourge approaches its fourth month, a new report says.

It says the percentage of respondents who have had to seek short-term credit doubled during the survey period.

Spending habits, according to Boston Consulting Group's Consumer Sentiments Survey conducted in April and May this year, have also changed accordingly.

"In May, 29 percent responded that they had taken out a short-term loan, compared to 16 percent in April. Mobile money operators were the most common sources of this credit, with the vast majority of those loans — 88 percent — coming from M-Shwari, Fuliza, or KCB-M-Pesa," the report indicates. In the same month, concerns about Covid-19 were still at the top of consumers' minds, but only slightly ahead of several rising socio-economic concerns.

LOSS OF JOBS

They were business closures, loss of jobs and increased poverty that created a new wave of psychological, financial panic and fear.

"These fears are based in reality as 92 percent of Kenyan consumers surveyed reported they are currently experiencing a negative impact on their household income; and only seven percent said they felt no negative effects on their household income," Takeshi Oikawa, one of the authors of the report, told the Nation.

Concerns about the ability to meet personal financial obligations have also arisen. While 59 percent reported that they were worried about being able to meet their needs in April that percentage had risen to 68 percent in May.

Monthly mortgage and rent payments top the list of concerns followed by utilities, school fees, short-term loan payments, and support for extended family members. A third of those surveyed said they are already in financial trouble and 40 percent feel financially vulnerable.

"Most don't expect a quick recovery. About 70 percent said they believe it will take at least six months to rebound financially, and 23 percent think that recovery is more than a year away," the study said.

INCOME INSECURITY

Income insecurity means that Kenyan consumers are focused on reducing their spending, at least in the short-term. Many of those polled are not sure they will be able to maintain their current income levels in the next month.

Spending patterns are also shifting away from discretionary products and services towards those deemed essential such as groceries and staples, fresh food and baby food.

"Kenyans are spending less on clothing and shoes, eating at restaurants, cosmetics and alcohol. These shifts are similar to those we see in other emerging economies," said Mr Oikawa.

Every consumer is looking for bargains. Respondents said they plan to shift to more economical brands in all spending categories, particularly in fresh foods, hair, personal care products and household goods.

These changes are happening quickly, and those surveyed said they plan to switch brands within a month, but may well persist beyond the immediate crisis.

The Kenyan market shows signs of resilience. Although most of those surveyed said they believed the world was in serious danger, the worst is yet to come, and that a recession is coming.

Local consumers were more concerned with preserving health and safety than with their economic well-being in April, a month after the first case of Covid-19 was reported in the country, concludes the survey findings.

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