Kenya’s consumer outlook buoyant even as lending rate shows significant rise




Information and insights company TransUnion has published its latest Consumer Pulse Study which shows that Kenyan households experienced a modest financial rebound in the second quarter of 2024, largely driven by new business ventures, enhanced debt management, and less impact from job losses.

According to the study, 34% of consumers saw an increase in income in the last three months, led by gains among the Gen Z (18–26 years old) and Millennial (27–42 years old) groups. While a similar number (36%) of consumers also reported a decrease in income over the last three months, optimism about future income is high with 85% of consumers expecting an increase over the next 12 months. This positive outlook is particularly prevalent among younger generations.

Consumers’ ability to pay their bills in full increased significantly, with 64% saying that they would be able to do so in the second quarter of 2024, while those unable to pay decreased by six percentage points to 36% compared to the same time last year. Kenyan consumers have been resolute in tackling their outstanding debts: 51% opted to pay partial amounts if they were unable to settle them in full, and one-third (33%) of consumers are prepared to utilise savings to service their debts.

Behaviour trends and financial choices

Over the past three months, consumers cut back on non-essential expenditure, with 56% of households, particularly Gen X (43–58 years old), reporting reduced discretionary spending. Across all generations, 49% of consumers are expecting to reduce discretionary spending in the next three months and 42% anticipate cutting back on large purchases like appliances and vehicles. However, consumers plan to direct their increased disposable income towards retirement funds (48%), bills and loans (41%), and digital services (38%).

A growing number of households (41%, compared to 30% in the second quarter of 2023) have increased their contributions to emergency funds as a strategic measure to buffer against potential payment shocks.

“The possible easing of inflationary pressures in the near future may lead to growth in disposable income, which could in turn support household consumption in 2024. This may be especially true if the expected income increases come to bear and consumers see fit to increase their discretionary spending, and reinstate the digital services, memberships and subscriptions that were cancelled during the quarter,” says Morris Maina, CEO of TransUnion Kenya.

Credit and financial inclusion

Financial inclusion in Kenya is on the rise, driven by the adoption of mobile technologies and digital payment methods. However, while nearly all (99%) consumers deemed access to credit as essential, only 36% of consumers feel they have sufficient access to credit – a slight improvement from 33% a year ago.

The demand for credit remains high, with 60% of consumers planning to apply for new credit, or to refinance existing credit, within the next 12 months. Millennials (55%) and Gen X (58%) show the greatest intention to take out new personal loans, while 38% of respondents are considering new mobile loans. Interest in ‘buy now, pay later’ (BNPL) services has grown, with 33% of consumers planning to explore this credit option (a five percentage-point increase from the second quarter of last year).

Despite the demand for credit, 66% of consumers who intended to apply ultimately chose not to. The primary deterrent is the high cost of credit (41%), with the recent increase in the policy rate raising the average commercial bank lending rate to the highest level in eight years.

Monitoring credit reports

The study shows that monitoring their credit status is crucial for Kenyan consumers, with 91% considering it extremely, very or moderately important. The frequency of credit report checks increased, with 59% of respondents reviewing their reports at least monthly. Consumers (60%) believe that including alternative data in credit reports, like rental payments and BNPL loans, could improve their credit scores.

Fraud and consumer education

Kenyan consumers continue to embrace digital platforms, with 42% conducting at least half of transactions online, up 10 percentage points from last year. However, digital fraud remains a significant concern. In the second quarter of 2024, 72% of consumers reported being targeted by digital fraud schemes but avoided falling victim, and 8% reported being targeted and claimed they fell victim. Vishing (45%, compared to 40% in the second quarter of 2023), smishing (44%, compared to 40% in the second quarter of 2023), and phishing (36%, compared to 33% in the second quarter of 2023) scams are on the rise, but awareness of digital fraud schemes is high.

Consumer concern about sharing personal information remained significant at 91%, albeit down from 94% in the second quarter of 2023. Concerns related to sharing personal information included invasion of privacy (81%) and fear of identity theft (67%), emphasising the necessity for robust security measures and consumer education to uphold trust in digital platforms and encourage greater use of digital services.

“This research shows how important it is for consumers to monitor their credit records regularly. Early detection of fraudulent activities that could impact their credit scores enables consumers to take timely corrective action,” says Maina.

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries, including Botswana, Kenya, Malawi, Namibia, Rwanda, South Africa, eSwatini, and Zambia. The company makes trust possible by ensuring each person is reliably represented in the marketplace by providing an actionable view of consumers, stewarded with care. Through its acquisitions and technology investments, the firm has developed innovative solutions that extend beyond its strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics.

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