More and more Kenyans taking Tala loans to pay school fees: report

The number of Kenyans seeking loans from the fintech credit provider Tala to pay school fees has seen a year-on-year increase since 2022, a new report released Tuesday shows.

Tala’s MoneyMarch 2024 report shows that loans taken for personal reasons are mainly for paying school fees.

The percentage of consumers who gave school fee payments as their reason for borrowing money went from 20 in 2022’s report to 28 last year while this year, school fee payments made up 33 percent of the respondents.

Most loans are however directed to business needs, the report shows, with this being common among those whose main income is a full-time job (50 percent versus 46 percent in 2023) compared to business owners.

Other uses Kenyans cited for digital loans are business capital or restocking (31 percent), medical expenses, utility bills, rent, public transport, and contributions to informal cooperative societies, commonly known as chamas.

Of these, medical expenses, utility bills, and rent payments have also seen steady year-on-year growth during the same period.

“Consumers are increasingly channelling loans to medical expenses year on year, presenting an opportunity to partner with health insurance providers and onboard customers onto plans where they repay in monthly instalments,” said Teddy Kahiro, the user research manager at Tala.

“The high cost of living has impacted the ability to pay for basics like rent as seen in the increased mentions of rent payment as reasons for borrowing over the years.”

Digital credit has been on the rise in Kenya in recent years mostly due to its easy accessibility and lower interest rates compared to banks.

The latest Financial Access Survey by the Kenya National Bureau of Statistics indicates that 4 percent of Kenyans access credit through digital credit providers (DCPs).

Many Kenyans are also borrowing from several digital lenders at a go, as the 2024 MoneyMarch report shows that 57 percent of Tala consumers use more than one digital lender, possibly borrowing from one lender to pay another lender, alternatingly, while reducing their loan amount.

“Consumers are most concerned about access and repayment period, continuing the trend seen over the years. Loan collection tactics are increasingly determining which lenders consumers will borrow from to avoid crude lenders,” the report says.

The Central Bank of Kenya has so far licensed 51 DCPs to operate locally as part of regulations introduced last year to weed out rogue players in the booming industry, as well as control how lenders use consumer data.

Tala says it processes nearly $200 million (Ksh.26.7 billion) in monthly transactions for more than eight million customers in Kenya, the Philippines, Mexico, and India. The lender entered Kenya in 2014.

Some of the fintech’s backers include Upstart, Stellar Enterprise Fund, RPS Ventures, J. Safra Group, IVP, Revolution Growth, Lowercase Capital, and PayPal Ventures.