The number of Kenyans taking loans from financial institutions has risen by 10 percent since 2019 reaching about 14.4 million, occasioned by a slight improvement in financial literacy.
But while most of these adults applied for loans and could calculate the interest charged, the decisions to apply were also fuelled by survival, making credit their source of livelihood.
The findings were contained in a report titled The 2021 FinAcces Household Survey, compiled by the Kenya National Bureau of Statistics and the Central Bank of Kenya, covering 2020 and 2021.
It revealed that savings improved by only 4 percent, mostly because the Covid-19 pandemic also cut sources of income. But the fact that borrowing exceeded savings also means banks must do better to encourage saving.
The survey used the knowledge of the cost of borrowing as a measure of financial literacy.
At least 11.6 million, accounting for 49 percent of the adult population, could correctly calculate 10 percent interest on a Ksh10,000 ($88) loan, up from 10.2 million people (43 percent) in 2019.
At the same time, banks and saccos rejected several loan applications, mainly due to lack of collateral, guarantors or proof of regular income, and bad credit history or negative listing by a credit reference bureaus (CRB) in Kenya.
The survey showed that majority of people cited the need to meet day-to-day household expenses, emergencies such as burial and medical, and education as the main motivations for saving.
Majority of the 6 million adults in Kenya, who do not use any savings or deposit product, attributed that to lack of enough money to save, absence of a regular income, preference not to save, and lack of understanding.
The rise in use of credit came after President Uhuru Kenyatta announced a series of interventions to cushion citizens from the adverse economic effects of the Covid-19 pandemic in May 2020 and October 2021.
The $475 million economic stimulus package of May 2020 included a $26 million credit guarantee scheme, which was meant to improve access to affordable credit by small and micro enterprises.
Kenyans also reported reduced use of digital lending apps, while at least 4.3 million (18.3 percent) have used the Safaricom Fuliza product, which is an overdraft feature of mobile money service, M-pesa, that allows users to send money and pay bills even with insufficient funds.