The report said there is increased digital platform usage, with 42 per cent of Kenyans conducting at least half of their transactions online, emphasising the necessity for robust security measures and consumer education
BY VICTOR ADAR
Information and insights company, TransUnion, in its latest “Consumer Pulse Study” which said that amid widespread challenges, including protests, Kenyan households experienced a modest financial rebound in the second quarter of 2024 thanks to new business ventures, enhanced debt management, and less impact from job losses.
The study, released amid widespread challenges, including weeks of protests that left over 40 people dead and scores injured, said 34 per cent of consumers saw an increase in income in the last three months, led by gains among the Gen Z (18–26 years old) and Millennial (27–42 years old) groups. While a similar number (36 per cent) of consumers also reported a decrease in income over the last three months, optimism about future income is high with 85 per cent of consumers expecting an increase over the next 12 months. This positive outlook is particularly prevalent among younger generations.
Consumers’ ability to pay their bills in full increased significantly, with 64 per cent saying that they would be able to do so in Q2 2024. But those unable to pay decreased by six percentage points to 36 per cent compared to the same time last year. Kenyan consumers have been resolute in tackling their outstanding debts: 51% opted to pay partial amounts if they were unable to settle them in full, and one-third (33 per cent) of consumers are prepared to utilise savings to service their debts.
Trends and financial choices
Over the past three months, consumers cut back on non-essential expenditure, with 56 per cent of households, particularly Gen X (43–58 years old), reporting reduced discretionary spending. Across all generations, 49 per cent of consumers are expecting to reduce discretionary spending in the next three months and 42 per cent anticipate cutting back on large purchases like appliances and vehicles. However, consumers plan to direct their increased disposable income towards retirement funds (48 per cent), bills and loans (41 per cent), and digital services (38 per cent).
A growing number of households – 41 per cent, compared to 30 per cent in Q2 2023 –, have also increased their contributions to emergency funds as a strategic measure to buffer against potential payment shocks.
“The possible easing of inflationary pressures in the near future may lead to growth in disposable income, which could in turn support household consumption in 2024. This may be especially true if the expected income increases come to bear and consumers see fit to increase their discretionary spending, and reinstate the digital services, memberships and subscriptions that were cancelled during the quarter,” Chief Executive Officer of TransUnion Kenya Morris Maina, said.
Credit and financial inclusion
Financial inclusion in Kenya is on the rise, driven by the adoption of mobile technologies and digital payment methods. However, while nearly all (99 per cent) consumers deemed access to credit as essential, only 36 per cent of consumers feel they have sufficient access to credit – a slight improvement from 33 per cent a year ago.
The demand for credit remains high, with 60 per cent of consumers planning to apply for new credit, or to refinance existing credit, within the next 12 months. Millennials (55 per cent) and Gen X (58 per cent) show the greatest intention to take out new personal loans, while 38 per cent of respondents are considering new mobile loans. Interest in ‘buy now, pay later’ (BNPL) services has grown, with 33 per cent of consumers planning to explore this credit option (a five percentage-point increase from Q2 last year).
Despite the demand for credit, 66 per cent of consumers who intended to apply ultimately chose not to. The primary deterrent is the high cost of credit (41 per cent), with the recent increase in the policy rate raising the average commercial bank lending rate to the highest level in eight years.
Credit reports
The study shows that monitoring their credit status is crucial for Kenyan consumers, with 91 per cent considering it extremely, very or moderately important. The frequency of credit report checks increased, with 59 per cent of respondents reviewing their reports at least monthly. Consumers (60 per cent) believe that including alternative data in credit reports, like rental payments and BNPL loans, could improve their credit scores.
Fraud and consumer education
Kenyan consumers continue to embrace digital platforms, with 42 per cent conducting at least half of transactions online, up 10 percentage points from last year. However, digital fraud remains a significant concern. In Q2 2024, 72 per cent of consumers reported being targeted by digital fraud schemes but avoided falling victim, and 8 per cent reported being targeted and claimed they fell victim. Vishing (45 per cent, compared to 40 per cent in Q2 2023), smishing (44 per cent, compared to 40 per cent in Q2 2023), and phishing (36 per cent, compared to 33 per cent in Q2 2023) scams are on the rise, but awareness of digital fraud schemes is high.
Consumer concern about sharing personal information remained significant at 91 per cent, albeit down from 94 per cent in Q2 2023. Concerns related to sharing personal information included invasion of privacy (81 per cent) and fear of identity theft (67 per cent), emphasising the necessity for robust security measures and consumer education to uphold trust in digital platforms and encourage greater use of digital services.
“This research shows how important it is for consumers to monitor their credit records regularly. Early detection of fraudulent activities that could impact their credit scores enables consumers to take timely corrective action,” says Maina.
