Mobile loans remained the most common form of credit in Kenya, accounting for 52.79 per cent of all active loan accounts with a total balance of Sh158.8 billion in the first three months of the year.

According to TransUnion Kenya’s Q1, 2024 Market report released Wednesday, at least 3.92 million new mobile loan accounts were opened, an 11.02 per cent increase from the previous quarter.

However, the average quarterly borrowing limit per borrower decreased by 7.48 per cent from Sh16,860 to Sh15,600, indicating a measured approach by both lenders and borrowers in the first quarter’s economic climate.

The evolving regulatory environment has contributed to more people applying for mobile loans, with licensed FinTechs now submitting data to TransUnion.

“The result is better insights into the overall market and the health of consumers, enabling lenders to make better-informed decisions on credit applications,’’ the report reads.

Low-value overdrafts (ODs) — the lifeblood of accessible credit in the Kenyan market — represented a significant 32.81 per cent of all active loan accounts, with over 9.84 million active accounts holding a balance of Sh34.69 billion at the end of Q1 2024.

The first quarter 2024 dip in low-value ODs originations saw the volume of new accounts opened retracting to 5.36M, a 40.29 per cent decrease from the 8.97 million in the previous quarter.

There was also a 32.57 per cent drop in the value of new, low-value ODs booked to Sh4.5 billion from the previous quarter’s Sh6.68 billion.

The average quarterly limit increased by 12.93 per cent from Sh745 to Sh818. The quarter marked a contraction in unique borrowers of low-value ODs to approximately 7.6 million from 8.02 million in the previous quarter.

High-value ODs, while comprising a small percentage ( 1.89 per cent) of all active loan accounts, held a significant balance of Sh499.1 billion.

The first quarter of 2024 saw a 25.3 per cent reduction in the number of new high-value overdraft accounts, with the value of these overdrafts decreasing by 17.6 per cent to Sh29.36 billion.

“This trend suggests tighter credit conditions and more selective lending practices in this segment.” The banking sector remained the backbone of Kenya’s credit market and held more than 96 per cent of all loan balances, accounting for 27.18 million active accounts.

Even though there was a slight decline in the number of new accounts opened, the sector’s dominance underscores its critical role in providing credit to both consumers and businesses.

Asset finance is a niche product and comprised 0.32 per cent of all active loan accounts in Q1 2024 — just 97,410 — but it made up a balance of Sh200.8 billion and continued to play a critical role in the economy.

The first quarter of 2024 saw a significant 27.06 per cent drop from 6,660 accounts opened in the previous quarter to 4,860 accounts.

Additionally, the total value of new asset finance booked receded 22.78 per cent to Sh12.84 billion from Sh16.63 billion. Nevertheless, the average quarterly limit grew 5.86 per cent from Sh2.5 million to Sh2.64 million.

Millennials continued emergence as a driving force in credit, accounting for a substantial portion of the principal amounts across several loan categories, including mobile loans ( 51.1 per cent), personal loans ( 49.6 per cent), and asset finance ( 16.5 per cent).

This demographic’s strong presence underscores the need for financial institutions to innovate and provide products that cater to the unique preferences and behaviours of younger borrowers.

“Kenya has a dynamic and evolving lending market, with diverse credit products and solutions available that respond with agility to consumers’ and businesses’ needs. While some challenges remain, efforts towards extending financial inclusion even further, along with technological advancements, are shaping the country’s future credit market.”

Nevertheless, the report shows that the consumer lending market in Kenya reflected a mix of resilience and optimism in the period under review.

During the first quarter, the Central Bank of Kenya (CBK) raised the Central Bank Rate (CBR) to 13 per cent, up from 12.50 per cent in the previous quarter.

The Kenyan Shilling continued to depreciate against major international currencies during the same quarter, further influencing the local credit environment.

“Q1 2024 could be defined as a quarter of expectation. We anticipated a return of investor confidence and an increased appetite for lending. To this end, active accounts grew by a small margin of 0.2 per cent quarter-over-quarter (QoQ), but with a significant year-overyear (YoY) growth of 20 per cent. This reflects a cautious optimism among lenders as they started to regain confidence in the market,” says Morris Maina, CEO at TransUnion Kenya.