Relatives’ pressure drives middle-class to loan apps

Wednesday, June 22nd, 2022 03:26 | By
Mpesa transaction. Photo/File

A growing number of working middle-class Kenyans are paying a heavy price for having to protect their elders and relatives, a new study has shown.

The survey by financial services firm, Enwealth dubbed Saving and Investments Behaviour among Kenyans, highlights a widespread financial anguish among generation Z and millennials who are now forced to seek financial rescue from mobile money lending Apps to withstand pressure from relatives.

What’s worse, the report’s drafters believe that tough economic times and reduced employment opportunities could further see more Kenyans drained of their last savings if current conditions persist.

Those concerns, according to the survey, are now used to explain the low savings culture among younger generations, with a staggering 68 per cent of those who took part in the survey confessing to applying for mobile loans, to look after their relatives. An estimated 57 per cent of respondents who applied for such loans indicated it had a negative impact on their saving habits, with 20 per cent of such individuals earning a meagre monthly income of less than Sh30,000. 

About 23 per cent of such respondents take home monthly wages ranging between Sh30,001 and Sh60,000, who are forced to borrow to complement their basic obligations.

“About 83 per cent of those who do not save attribute it to recurring expenses and inadequate disposable income while 84 per cent of the working population regularly send money to their extended family for daily upkeep such as food, transport and medical expenses,” noted Enwealth’s Chief executive Simon Wafubwa, who recommended tax reliefs to the informal sector as an incentive to boost the savings culture.

The review by Enwealth, according to Duncan Motanya, Chief executive of Zenka, a mobile lending App, represents a surging need for quick loans among Kenyans who have continued to rely on such platforms to meet their day to day financial commitments.

The need for such options, he says, has been heightened by the increasing poverty levels in most Kenyan households which jumped by four percentage points, an equivalent of two million additional households that were impacted by Covid-19, leading to sharp decreases in incomes and employment when the pandemic hit.

Kenya’s economy continues to suffer from Covid-19 ravages, severely affecting incomes and jobs particularly the youth.

“The proposed adjustments in the industry by the Central Bank of Kenya (CBK) is a welcome move which gives us hope as operators in this space,” said Motanya.

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