Report: Depreciation of shilling hurt local economy and credit landscape

Kenya’s economic landscape showcased remarkable resilience in 2023, with gross domestic product (GDP) growing at 5.9 per cent in the third quarter of 2023, compared to 4.3 per cent in the corresponding quarter of 2022.

This is according to the TransUnion quarter four of 2023 Kenya Credit Industry Insights Report, which provides an in-depth analysis of the macroeconomic environment and its influence on credit trends within the country.

The report showed a state of flux in the credit market, shaped by macroeconomic shifts, consumer behaviour changes and technological advancements.

In December 2023, the Central Bank of Kenya (CBK) adjusted the Central Bank Rate (CBR) to 12.50 per cent. This increase from 10.50 per cent had impacted the cost of loans and Kenyans’ repayment capacity. The depreciation of the Kenyan Shilling against major international currencies has also put further pressure on the local economic and credit landscape. 

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“By embracing mobile technology and adapting to economic shifts, we are working hard to enable more people to access the credit they need to thrive, even in challenging times. This commitment to financial inclusion drives our nation‘s economic resilience and growth,” said TransUnion Kenya CEO Morris Maina.

In quarter four of 2023, mobile loans accounted for 50.61 per cent of all active loan accounts in Kenya, holding a collective balance of Sh148.7 billion.

At more than 10.44 million loan accounts, low-value overdrafts (less than Sh6,000 of the principal amount) are the lifeblood of accessible credit in the Kenyan market. These represent 34.89 per cent of all active loan accounts, holding a balance of Sh13.06 billion.

High-value overdrafts (higher than Sh6,000 of the principal amount) comprised 2.03 per cent of all active loan accounts in the local market, commanding a balance of Sh506.6 billion.

The value of new high-value overdrafts booked increased to Sh35.61 billion in quarter four of 2023 from Sh20.9 billion in the comparative quarter last year.

According to the report, the banking sector remained the backbone of the credit industry with the highest loan balances, accounting for 96.16 per cent of the market with 27.03 million active accounts.

However, the microfinance sector (741,900 active accounts constituting 0.81 per cent), FinTech (1.43 million at 0.22 per cent), and Saccos (336,800 at 1.01 per cent) reflect the evolving credit ecosystem.