Rising living costs in Kenya have led to a significant increase in borrowing, with one-third of Kenyans opting for loans as their primary coping mechanism. Traditional strategies, like reducing expenses, are declining, and a notable portion of the population is focusing on business ownership and future financial goals. With ongoing economic pressures, Kenyans maintain a resilient outlook despite challenges.
In Kenya, rising living costs are necessitating increased borrowing among the populace, with over one-third of Kenyans reporting higher loan uptake. Traditionally, Kenyans coped with economic downturns by cutting spending, especially on non-essential goods. However, a recent Money March report by digital lender Tala reveals a significant shift, wherein individuals are now turning to loans instead as their primary coping mechanism due to minimal available cuts to their expenditure.
According to the report, traditional spending cuts have diminished, with only 59 percent of respondents planning to reduce expenditures this year, down from 72 percent last year. Conversely, those opting for increased borrowing rose from 27 percent to 46 percent within the same period. Additionally, interest in starting new businesses as a coping strategy has surged from 34 percent to 51 percent. Teddy Kahiro, Tala’s research manager, indicated that many Kenyans feel they have exhausted their expenditure cuts, prompting the question of whether borrowing is becoming a necessity.
Increased borrowing trends align with the ongoing economic climate, where 80 percent of borrowers assert confidence in their repayment abilities for business, educational, and daily living expenses. Annstella Mumbi, Tala-Kenya’s general manager, emphasized that business ownership and home purchasing rank as top financial goals for respondents over the next five years. Furthermore, many individuals allocate 11 to 20 percent of their income toward savings, driven primarily by the aims of wealth growth and retirement planning.
The report also noted an increase in business ownership by seven percent year-on-year, while reliance on full-time employment for income sources has declined by five percent. Conversely, participants in full-time and part-time work are engaging less in secondary income ventures amid the high cost of living. Nearly 90 percent of Kenyans surveyed have encountered financial challenges lately, but a resilient outlook persists, with 46 percent feeling optimistic about their financial futures.
This emerging trend in borrowing can be viewed as a response to the strain many households are facing, thus raising concerns regarding long-term financial well-being and sustainability.
The landscape of borrowing in Kenya is increasingly becoming a necessity as rising living costs and economic pressures compel individuals to seek loans to sustain their livelihoods. The decline in traditional expenditure reduction tactics paired with an uptick in borrowing indicates a significant shift in financial strategies among Kenyans. Despite encountering ongoing challenges, a sense of optimism remains prevalent, highlighting resilience within the population as they navigate their financial futures.
Original Source: eastleighvoice.co.ke
