In Kenya, over one-third of citizens are increasing borrowing amid rising living costs. A shift from traditional expense-cutting to relying on loans reflects the economic pressures faced. The Tala report indicates a significant rise in borrowing intentions, with aspirations for business ownership and investments also noted. Despite financial challenges, a sense of optimism persists among the populace.
Kenya is experiencing a significant rise in borrowing among its citizens, with over one-third of Kenyans increasing their loans amid escalating living costs and delayed income. Traditionally, in times of economic adversity, individuals would reduce expenditures. However, a shift is being observed as many opt for loans instead, as essential expense cuts have become nearly impossible.
According to the latest Money March report by digital lender Tala, the rising costs have compelled individuals to seek financial assistance, thus abandoning the previous trend of reducing spending. This report reveals a 13% decline in individuals planning to cut expenditures, dropping from 72% last year to 59%. In contrast, the number of people opting to borrow increased significantly from 27% to 46%.
Additionally, there is an uptick in those starting new businesses as a coping strategy, with figures rising from 34% to 51%. Teddy Kahiro, research manager at Tala, pointed out that many Kenyans feel they have exhausted all options to reduce their expenses amid the persistent high cost of living, raising a critical question about the necessity of borrowing.
The report specifies that borrowing has increased due to essential needs such as business expenses, education, and daily living. Approximately 80% of borrowers express confidence in their ability to repay these loans. Annstella Mumbi, general manager at Tala-Kenya, noted that respondents indicated aspirations for business and home ownership over the next five years.
Moreover, many are allocating 11 to 20% of their income toward investments in various savings schemes, aimed at wealth growth, business expansion, and retirement planning. However, challenges such as fear of loss and distrust in investment platforms hinder further savings. The report also highlights a 7% rise in business ownership compared to the previous year and a 5% decrease in full-time employment as the main income source.
Notably, financial challenges persist as 90% of Kenyans report these issues, with 32% feeling stressed by their financial situation. Still, optimism remains strong, with 46% feeling positive about their financial futures. The impact of the high cost of living continues to influence daily life, compelling many to rethink their financial strategies and reliance on borrowing.
In summary, the trend of increasing borrowing in Kenya is a direct response to rising living costs and economic challenges. Traditional coping mechanisms, such as reducing expenditures, are becoming less viable, forcing many to consider loans as a necessity to maintain their livelihoods. Despite the financial strain, there remains a notable sense of optimism among Kenyans regarding their future financial prospects.
Original Source: eastleighvoice.co.ke
