Digital lending has fast become a lifeline, with eight million Kenyans accessing KShs 15 billion in loans monthly from digital credit providers (DCPs) in 2024- amounting to an estimated KShs 180 Billion annually.
This surge came at a time when traditional banks had frozen lending over mounting defaults, underlining the critical role digital lending now plays in the economy. According to a 2025 report by the Digital Financial Services Association of Kenya (DFSAK), the growth of digital credit has been driven in part by smartphone penetration and the rise of the boda-boda industry, both of which have been largely financed through DCPs. On average, an estimated 100,000 smartphones per month were funded through digital credit in 2024 alone.
This financial support has translated into real economic impact. The boda-boda industry today directly employs over 2 million Kenyans, with many workers in the sector using smartphones to unlock greater earning potential- especially among low-income groups. Beyond transport, digital loans have increasingly been used for essentials like school fees and business expenses.
The 2024 Central Bank of Kenya (CBK) FinAccess Survey further underscores this trend, noting that micro-finance institutions- including digital lending apps- recorded the fastest growth usage between 2021 and 2024, rising from just 1.7% to 8.8%. This outpaced the uptake of bank and SACCO products in the same period.
An estimated 2.4% of Kenyans- roughly 668,491 people- had accessed credit via mobile apps, while another 6.2% (1.75 million individuals) relied on hire purchase or buy-now-pay-later services such as Lipa Mdogo Mdogo. Overall, credit access rose from 60 to 64% over the three years, much of it linked to mobile and app-based digital lending.
Regulations, and Reputations
Yet, despite the sector’s fast growth and increasing relevance, digital lenders continue to face regulatory and reputational challenges. Industry players have long been subject to biased taxation, and, at times, public ridicule. A notable incident involved a former CBK Governor who labelled DCPs as ‘fleas’ causing ‘extreme pain’ to society- accusations that overshadowed the industry’s broader positive impact.
Stories of aggressive loan recovery tactics, including contacting borrowers’ pastors, fueled this backlash. The CBK now regulates the industry, and as of June 2025, it had licensed 126 digital credit providers, with another 574 awaiting approval.
Still, concerns persist over the uneven tax regime DCPs face in Kenya. Compared to global peers, the country’s taxation model remains unusually punitive. In Indonesia, for instance, DCPs pay only a standard withholding tax on interest and VAT on service fees. Kenyan providers, on the other hand, must also pay excise duty on loan interest fees, making digital credit more expensive locally.
According to Philip Muema, a partner at Andersen, the imbalance in taxes directly leads to a higher cost of credit for borrowers. DCPs are usually forced to pass some of the costs to customers in the form of higher interest rates and service charges. Consequently, it is low-income individuals and small enterprises, particularly those in rural areas who face reduced access to affordable credit, undermining efforts to alleviate poverty and support inclusive growth.
Even as the digital lending sector matures from its teenage years, its ability to transform lives hinges on a fairer operating environment that recognizes its contribution to Kenya’s financial ecosystem.
Terryanne Chebet is a senior communications and public relations leader with over 20 years’ experience shaping narratives, managing reputation, and building influential brands across Africa.
The views expressed here are the author's own and do not necessarily reflect the editorial stance of The Kenyan Wall Street.
