Kenyan Consumers Remain Optimistic, But Financial Worries Weigh Heavy

A new survey by TransUnion has revealed a mixed financial outlook for Kenyan consumers in the second quarter of 2023. The research, presented at its annual Financial Services summit in Nairobi, found that while eight in 10 (79%) expect their household incomes to increase in the coming year, four in 10 (41%) reported a decrease in income over the past three months, and a similar number (42%) anticipate being unable to pay their current bills and loans in full.

According to TransUnion’s Consumer Pulse Study, one of the significant factors contributing to the decrease in household income was job loss, with 30% of consumers reporting that someone in their household lost their job over the past month – an eight-percentage point increase from the previous year. Other factors impacting income included wage or salary reductions and declining small business revenue.

Many consumers have been forced to adjust their household budgets in response to these challenges, with as many as 62% cutting back on discretionary spending over the past three months, said Morris Maina, CEO TransUnion Kenya.

According to the Kenya National Bureau of Statistics, Kenya’s inflation rate unexpectedly rose to 6.8% in September 2023, up from the 6.7% in August. This is expected to increase some cost burdens for consumers, particularly around food prices. GDP grew by 5.4% in the second quarter, a slight increase from the previous quarter, primarily due to a rebound in the agricultural sector as the country recovers from its worst drought in four decades.

Looking ahead, consumers are bracing for further financial strain. A significant 39% of consumers expect an increase in bills and loans, while 44% expect their in-store and online shopping to decrease. In addition, 55% of consumers plan to make further cuts to their discretionary spending, and 47% expect a decrease in large purchases such as appliances and cars.

The survey also highlighted a decline in access to credit and consumer confidence in the credit market. Nearly all consumers (98%) believe access to credit is crucial. However, only one third (33%) feel they have adequate access to credit, a 12-percentage point drop from the previous year.

Fewer people are applying for credit, with 55% of consumers intending to apply for new credit or refinance within the next year, a five-percentage point decrease from the previous year. Millennials are particularly cautious, with only 49% intending to take on new credit, down from 60% last year. Despite this, mobile loans and 'buy now, pay later' (BNPL) services are gaining popularity among prospective borrowers, with 28% of consumers planning to explore BNPL.

Managing financial choices

Kenyan consumers continue to embrace digital platforms. Approximately 32% of respondents reported that at least half of their transactions are conducted online, similar to the previous year.

Most consumers (75%) believe monitoring their credit is very or extremely important. However, there has been a decline in the frequency with which consumers monitor their credit reports, with only 25% of those surveyed checking their reports monthly, compared to 33% the previous year. Most respondents (57%) believed their credit scores would improve if businesses used alternative data sets not included on a standard credit report, like rental payments, gym membership dues, short-term loan histories and BNPL products.

Identity risks and usage

Digital fraud is on the rise. More than seven in 10 respondents (73%) reported being the target of fraud schemes in the past three months. An additional 8% was targeted and fell victim. The most common scams were money or gift card scams (44%), vishing (40%) – fraudulent phone calls designed to trick you into revealing personal data – and smishing (40%), fraudulent text messages with the same aim.

Concerns about sharing personal information have risen, with 94% of consumers expressing worry, a seven-percentage point increase from the previous year. The primary concern cited was the invasion of privacy (81%), followed by fear of identity theft (68%). These findings underscore the need for stringent security measures and consumer education about data protection to maintain trust in digital platforms.

“Overall, it's clear that consumers are increasingly aware of the risks associated with digital fraud. With rampant scams, consumers are cautious about sharing personal information, fearing privacy invasion and identity theft. This indicates a significant need for stronger security measures and robust fraud prevention strategies in the digital space,” said Maina.

Consumers can get their free annual credit report from TransUnion here.