Digital credit and loan services are not new to Kenyans.   Ever since the inception of digital credit solutions, the market for digital credit has expanded exponentially in Kenya and other low income countries. Due to digital advancements and access to internet services, there are now numerous digital credit services in the country and more new services are being launched on a daily basis.

A phone survey conducted by FSD-Kenya in partnership with the Central Bank of Kenya (CBK) and Kenya National Bureau of Statistics some time ago found out that digital credit has become the leading source of credit to most people in the country.  Many Kenyans appreciate the convenience and speed of accessing loans via their mobile phones from digital credit agencies such as Branch, Tala, Mshwari and consider it a safer option than other formal or informal money lenders.

The rapid proliferation of digital credit services in the country has allowed more people to get access to loans and credit. Many digital credit investors have been making billions worth of profit from financially needy  consumers who mostly  use   the loan  money to finance working capital and day- to –day financial needs.  While many traditional credit companies may have strict regulations and restrictions for loan qualification , the instant loan application and disbursement of digital credit services has made many Kenyan adults (18+ years)   active borrowers.

The easy accessibility to digital credit has however presented some concerns. Due to the rapidly growing market for such services, many people have been finding themselves bombarded with a litany of digital credit service ads, all promising financial freedom and autonomy. These debt traps intended to lure customers   have led to many Low-income Kenyan households digging themselves into a re-financial crisis from excessive borrowing and over-indebtedness.

A popular adage says that,” Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.”

This adage is true for all intent and purposes. A report from a survey done in 2017 reveals that,  At least 13% of all loan borrowers are reported to have been late at least once with their digital credit and 14% of digital borrowers are repaying multiple loans from more than one digital credit provider.  Many of this digital borrowers struggle to pay their loans, many of them having to dip into their short-term and long-term savings to pay back a loan.

Clearly borrowing through a mobile phone is quite advantageous than borrowing through the more traditional, in-person avenues.  Evidence from behavioral economics show that borrowing money through a mobile phone is way more tempting than traditional means. Many lenders have been using “push” loans by blasting unsolicited messages to potential borrowers, urging them to apply for loans. Since we are only human and always looking for opportunities to grow we are likely to fall into temptation and take loans we might not need.

As much as you do qualify for a loan from digital credit services, you shouldn’t take advantage of the liberties afforded by the digital credit agencies.  For all its advantages, these kinds of loans can spell a disaster if one  got careless. So, before you fully commit to a loan and  fall victim to debt related stress issues from loan defaulting,  you should carefully consider why you need the loan. If they fall within the following parameters, you probably don’t need that loan.

Recreational purposes

We all need a break from the fast-paced world that we live in. A little relaxation can have a lot of important health benefits and the general well-being of a person. However it’s not necessary to borrow money to pay for holiday trips or entertainment. It is way much easier to save on a regular basis for that coveted holiday trip or tickets for that Avengers movie. If you may not have saved enough money to cater for recreation, it’s better to choose entertainment or a holiday package that best suits your current financial situation.

Recreational needs often end up costing more than anticipated hence it’s better to avoid putting yourself in unnecessary debt related stress situations after you have fulfilled your needs. Besides most of these recreational events only offer a brief escape and come Monday, you have to get back to the grind, broke or not.

Designer clothes

Many people love to be seen in expensive, hip/trendy and beautifully tailored clothes. However it makes no sense to make a purchase of  Ksh 10,000 worth of clothing if you have to take out a loan with staggering interest rates. You are more likely to get similar clothing from second hand clothe stores like Muthurwa or Gikomba without a designer label at a fraction of the cost. Dress to impress, but within your means.

Gambling

There has been an influx of gambling services in the country for the past few years. The gambling hysteria has affected many of the youth in our country with many of them considering it as a means of income that has to be invested on.  This is however a deluded mindset and a very mucky road to trudge on. You don’t believe, with a few key strokes on Google, you can easily get   suicide related cases pertaining to debt related stress brought about by gambling.  By placing a bet, you are already risking your money to forces beyond your control (no matter how lucky you may perceive yourself to be). You worsen the situation by using your loan money, only to be end up repaying the debt plus interest for a longer period of time.

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