Digital Credit Providers Expand Loan Book to KSh153.8bn Amid Rising Borrower Debt

Digital credit providers disbursed KSh43.7bn in the six months ended June 2026, taking their total outstanding loan book to KSh153.8bn.

Data from the Central Bank of Kenya (CBK) show loans from digital lenders grew 39.6 per cent in the six months from KSh110.1bn in December 2025. The number of licensed DCPs rose to 281 from 252. Borrowers increased 32 per cent to 8.9 million from 6.74 million. Average loan size rose to KSh17,280 from KSh16,335.

A CBK report states the DCPs advanced KSh153.8bn to retail borrowers as of June 2026, more than all lending by micro-finance banks. It adds most loans are below KSh20,000 and have tenures of one week to two months.

The regulator notes the short tenure suits emergency needs and small-business working capital, but the loans are too small to enable significant investment.

A survey by Tala finds 45 per cent of borrowers use loans to stock businesses, 37 per cent for school fees and 23 per cent for daily needs.

Digital lenders use technology to assess customers, relying on mobile-money transaction data rather than credit-bureau checks or collateral, and they set limits based on repayment history.

DCPs charge a daily flat rate of about 0.6 per cent, equivalent to 24 per cent per month, compared with an average 14.4 per cent monthly rate charged by commercial banks.

CBK says the cost of recovering loans exceeds the loan extended, discouraging recovery and entrenching delinquency.

The regulator began overseeing DCPs in 2022 to curb extreme interest rates and harsh recovery practices such as social shaming.

Average loan size has risen from KSh12,248 in 2023 to KSh13,917 in 2024, to KSh16,341 in 2025, and now to KSh17,280.

The Competition Authority of Kenya (CAK) reports borrower complaints rose to 355 cases in the year to June last year, up from 67 the previous year, mainly over false representations and unreasonable conduct.

More than 500 digital lenders have not yet received CBK approval; the regulator requires a minimum capital of KSh20 million and is proposing to raise it to KSh50 million. Over 548 lenders are at various stages of review, most still needing to submit documentation.

CBK is also urging digital lenders to provide financial-literacy lessons to borrowers.

The FinAccess Household Survey shows 16.6 per cent of Kenyan homes were in debt distress, up from 10.3 per cent in 2021.

CBK has proposed that lenders stop automatically upgrading borrowers to higher limits after repayment and instead reassess finances before each review.