This archive report was first published on 24 August 2020.
Since the adoption of digital lending in Kenya, the process of accessing credit has become significantly faster and more efficient. According to Zenka Finance CEO Duncun Motanya, it now takes Kenyans just a few minutes to access credit at their own comfort, eliminating the need to travel or present paperwork.
Before the digital lending revolution, it took an average of three weeks and extensive paperwork for a lending decision to be made. The introduction of the Credit Information Sharing (CIS) system has made it easier for borrowers to access additional growth credit, fostering economic growth and reducing inequality in the country.
Improved credit ratings supported by the CIS system have enabled digital lenders like M-shwari, Tala, and Zenka to provide necessary funding to small businesses requiring quick short-term loans. This has bridged a gap in offering much-needed credit to small business people who lacked a credit score or banking history.
Mobile money deployment has grown faster than any other channel, mirroring the increased role of digitization in financial services. In 2019, the Central Bank of Kenya compelled commercial banks to increase loans to small businesses by 20% in the draft Kenya Banking Sector Charter.
A study by the International Trade Centre, Ministry of Trade, and Kenya National Chamber of Commerce and Industry (KNCCI) revealed that 33% of small traders avoid commercial bank loans despite their need for credit. SMEs represented 83.6% of the 846,000 jobs created across 2018, according to provisional data from the Kenya National Bureau of Statistics (KEBS).
“With just a tap on your smartphone, you can key in crucial data points that allow lenders to rate your creditworthiness,” said Motanya.
According to the Central Bank of Kenya, there are over 300 million positive transaction records, showing a huge population of Kenyans, including those without physical bank accounts, have benefited from improved access to credit over the years.
“Kenyans will be able to enjoy even better ratings and access to more credit when it becomes obligatory for lenders to check customer’s creditworthiness by pulling real-time credit reports from Credit Bureaus (CRBs) and reporting their actual credit history to CRBs,” Motanya added.
