Alternative lending helps Kenyan economy grow

About this article

“Where is my money going?” is a question every investor should always ask themselves. To help you answer it, we’re starting the Region Focus article series here on the Mintos blog. In this series, we want to introduce you to various regions and countries, and look at them from different perspectives: economy, culture, lending space, and other interesting facts. Please note we’re partly relying on our own observations when visiting the regions to meet lending companies, and some information here may not be backed up by official sources.

Welcome to Kenya

On Mintos, your money can travel to many countries around the world, and by doing so, you’re getting exposure to various economies. To kick off the series, let’s look at Kenya – what’s the economy like, what purposes do loans serve, and what’s the Kenyan borrowers’ attitude towards loans.

As of December 2019, there are three lending companies – Zenka, Watu Credit, Get Bucks – on Mintos that issue loans in Kenya, one of the most developed countries in Sub-Saharan Africa.

Economy of Kenya

• Population¹: 47.80 million
• Adults (over 15 years old)³: 60%
• Unemployment¹: 9.30%
• Citizens below the poverty line³: 36.1%
• Minimum monthly wage¹: US$ 133
• Average monthly wage¹: US$ 171 (low skilled), US$ 591 (high skilled)
• GDP per capita²: US$ 2,000 (nominal), US$ 3,868 (PPP)
• Main industries in Kenya²: services sector (63% of GDP), agriculture (24% of GDP)
• Main export goods²: tea, coffee, fish, cement, petroleum, and horticultural products

In Kenya, unemployment lies in the average level of African countries. Many people are working, however in jobs or as small business owners, earning a relatively low income, and are not always able to afford things like a personal vehicle.

While all this is happening, Kenyan banks have quite strict policies, which is often an obstacle to obtaining a loan for citizens who don’t have a contact working in a bank or have a property for a pledge. As a result, many Kenyans fall into the “unbanked” category: living with little to no access to bank services and products. This translates into a huge demand for alternative lending companies, some of which have already launched on Mintos. 

But how can Kenyans receive a loan if they don’t have a bank account?

Financial inclusion with mobile payments

While developed regions like Europe and the USA have been moving from traditional banking to mobile payments gradually, Kenyans have been focusing on such solutions for years. In fact, Kenya has the highest share of mobile money services in the world. 

Before the first mobile payments system, M-Pesa, was founded in 2007, only 1 in 3 Kenyans was financially included. The rest only had only cash, if any, as a means for transactions. This was a huge problem that turned into a great opportunity for Safaricom, the company that founded M-Pesa and revolutionized the way people in Africa can manage their finances. 

Image source: State of the Industry Report on Mobile Money (2018)⁴

But there were no convenient mobile apps at the beginning. At first, people in Kenya and the rest of Africa made payments, sent and received money, took and repaid loans in an unbelievably simple way – via text messages (SMSs). It’s no wonder that in much of Sub-Saharan Africa, mobile phones are more common than access to electricity⁵.

So one thing’s clear – there is a way to get loans in Kenya even if you don’t have a bank account. Let’s also look at some common uses for loans, or in other words, where your invested money goes. 

Why people take loans in Kenya

One of the most popular uses for personal loans in Kenya is to cover transportation needs, specifically buying a motorbike. Because of the relatively low price, safety, and convenience compared to cars, riding a motorbike is often associated with being poor. However, Watu Credit noticed that motorcycles were increasingly used by relatively wealthy citizens as a way of fighting the ever-increasing traffic in Africa. 

Image source: Pixabay⁶

Motorcycle loans

There are currently thousands of motorcycle loans from Watu Credit on Mintos with interest rates ranging from 7% – 10%, loan amounts of up to € 3 000, and a B Mintos Rating.

Apart from motorcycles, there is a high demand for loans to maintain and develop small businesses like taxi services that need cars or grocery kiosks that need stock to sell. Not only that, but also there are even small business owners who take intra-day loans to fund their daily operations and pay the loan back in the evening. 

Image source: Pixabay⁷

Attitude towards paying back the loans

All in all, responsible borrowers are more likely to pay loans back in time. And there are three important factors that support accountability among Kenyan borrowers:

• Higher down payments – Loans issued in Africa are known to have relatively high down payments (25% or higher) when compared to, for example, loans in Europe (as low as 10% or 0% on special offers).

• Social pressure – Africa has Savings and Credit Cooperative Societies (SACCOs) that play a significant social role, because not paying back a loan may harm the borrower’s reputation and inability to get future loans. As the locals say, everyone knows everyone.

• Purposeful borrowing – More often than not, Kenyans take loans for reasonable, reoccurring needs like transportation and small business maintenance to provide for their families, instead of, for example, to go on expensive vacations. 

Closing thoughts

There are many myths about people in African countries living in poverty with no infrastructure. 

Truth is, Kenya is full of hard-working families, a major part of them in the agricultural sector that contributes greatly to the country’s exports, thus growing the economy day by day. 

On our trips to Kenya and other Sub-Saharan countries, we’ve seen and met with many kind and happy locals. They’re living in good conditions, sending kids to well-developed schools, and always carrying around smartphones that take the role of the payment cards we’re so used to in Europe. 

Of course, there is a lot of room for development, and we believe foreign financing for the local lending companies helps. 

We hope you enjoyed this read about Kenya. Feel free to comment below what else would you like to know in further articles about other countries or regions. 


Used sources

¹Economics of Kenya – Trading Economics 
²Economics of Kenya – Wikipedia
³Making Digital Credit Truly Responsible
State of the Industry Report on Mobile Money
Mobile phones more common than electricity
Pixabay motorbike photo in Africa
Pixabay market photo in Kenya


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