The Digital Financial Services Association of Kenya (DFSAK) report reveals how these non-deposit-taking lenders have become the financial backbone for millions, supporting everything from small businesses and boda boda operations to education expenses.

The Digital Lending Revolution

DFSAK Chairman Kevin Mutiso highlighted the sector’s transformative impact: “The digital lending industry has become crucial for growth—attracting foreign investment, creating jobs, taking risks, and lifting millions out of poverty.”

The industry is also driving financial inclusion by financing approximately 100,000 smartphones monthly, significantly expanding internet access and digital participation across the country.

Economic Realities Behind the Boom

While demonstrating the strength of Kenya’s digital financial systems, the lending surge also reflects challenging economic conditions. Central Bank of Kenya (CBK) FinAccess data shows 64% of Kenyans rely on credit for basic survival, pointing to shrinking disposable incomes and heavy tax burdens.

Recent government interventions, including CBK’s rate cuts (reducing the Central Bank Rate to 10.75% and Cash Reserve Ratio to 3.25%), have yet to provide tangible relief to ordinary citizens feeling the economic pinch.

Regulatory Progress and Future Outlook

The sector welcomes the Business Laws (Amendment) Act 2024, which brought digital lenders under CBK regulation. This move has:

• Reduced consumer complaints from 4,000 monthly to just a handful
• Enhanced consumer protection measures
• Improved industry standards through a stricter code of conduct

DFSAK is now focusing on tax reforms around bad debt allowances to improve sustainability, while expanding its board with major industry players like 4G Capital and M-Kopa.

Mutiso remains optimistic: “Kenya remains at the forefront of Africa’s digital lending revolution, driven by high mobile penetration and growing demand for accessible financial solutions.”