Tala, a fintech licensed and regulated by the Central Bank of Kenya, recently conducted research to understand the impact of the cost of living on its customers in the Kenyan market and the role of credit in helping them. The study revealed that in 2023, fewer customers have full-time jobs or alternative sources of income compared to the previous year, and slightly more customers are now unemployed. However, they are engaged in some income-generating activities, while the employed are not exploring as much, probably because of the rising costs of living.
Additionally, Tala customers are experiencing lower incomes in 2023, with only 27% reporting an increase in income in the last six months, compared to 68% in 2022. This aligns with the decline in those with full-time jobs and those claiming to have alternative income sources.
Customers are generally facing several financial challenges, mainly due to the cost of living, seasonal expenses, business-related slowdowns, or insufficient income to cover their needs. However, Tala customers have a saving culture, with 25% of their earnings channelled to ‘savings’ such as chamas, saccos or fixed deposit accounts.
There’s a high appetite for borrowing, with half of the customers borrowing more compared to six months ago, though lower than in 2022, pointing to more need for credit in 2023 compared to 2022. The likelihood of future borrowing via digital lenders is high.
The report shows that most loans are aimed at servicing business needs. Those with full-time jobs take more business loans than the rest. Loans taken for personal reasons are majorly for paying school fees, medical expenses, and chama contributions.
The report indicates that Kenyan consumers have a high level of loyalty to one digital lender, and the incidence of consumers using more than three lenders has increased, signifying a growing need for loan access for some.
Tala Users Financial Resilience
Tala customers’ financial resilience has declined, with only 69% able to stretch their savings to sustain them beyond a month, compared to 81% in 2022. This points to an increased cost of living, which is the greatest financial challenge experienced by consumers.
The report highlights that consumers in Kenya need more guidance in creating a budget to manage expenses, which is very critical considering the increased expenditure for more than half of them over the last six months. There is a need for financial literacy to ensure better financial health, especially since their financial situation has not improved over the last six months, with two-thirds saying their situation has remained the same or worsened.
In conclusion, the Tala Money March report provides insights into the financial behaviour of digital financial services consumers in the Kenyan market. The report indicates a need for more loan products that cater to personal expenses, such as medical expenses, and a structured plan for school fees loans that would be beneficial to customers.
