Kenya’s digital lending landscape is seeing a rise in loan defaults among borrowers. This can be attributed to the current economic environment among other factors. This is rampant among younger and first-time credit users. According to the latest 2024 FinAccess Household Survey, 16.6% of borrowers defaulted on loans last year. This is up from 10.7% in 2021.
TransUnion Kenya is encouraging Kenyans to actively monitor their credit health using its free Nipashe app. This app helps individuals track their credit scores and correct any potential issues before they escalate.
“Credit, when used wisely, can be a powerful enabler, opening doors to education, entrepreneurship, and personal growth,” said Maina, TransUnion Kenya’s Country Director. “But without a foundation in financial literacy, many young borrowers risk excluding themselves from future opportunities because of poor credit decisions made today.”
Digital Loans
Kenya’s formal financial access now stands at 84.8% of adults. This is largely fueled by mobile loans and digital lending platforms. TransUnion says financial literacy hasn’t kept up and many borrowers have been left vulnerable to debt cycles and damaged credit scores.
Some of the most common pitfalls reported include:
- Misunderstanding loan terms and interest accumulation.
- Taking on more credit than can be repaid.
- Failing to realize how late or missed payments affect future access to credit.
“First-time borrowers often underestimate how a single default or late payment can impact their financial lives for years,” added Maina.
How Nipashe Helps Borrowers Stay on Track
Nipashe is available as a mobile app or through SMS. Nipashe can be used to:
- Check credit reports instantly.
- Identify errors or defaults
- Understand their credit scores and the factors that influence them
- Receive personalized tips to improve financial standing
The Nipashe app can be downloaded from the Google Play Store or you can access the services by texting their name to 21272.
“Encouraging smart credit use isn’t just about personal finance,” said Maina. “It’s about building a generation that can participate meaningfully in Kenya’s economy.”
Top 5 Smart Credit Tips for First-Time Borrowers
- Check Your Credit Status Early – Know your current credit health using the Nipashe App or SMS (21272).
- Only borrow what you can repay as defaults can harm your credit score leading to financial stress.
- Start Small and build a positive credit history.
- Limit credit to necessary expenses or income-generating activities.
- Learn how credit scores work.
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Also Read: TransUnion and FICO Introduce Advanced Credit Scoring Solutions for Kenya
