The Necessity of Borrowing in Kenya Amid Rising Living Costs

A significant shift in Kenyan consumer behavior has emerged, with over one-third now increasing their borrowing due to rising living costs. The traditional strategy of reducing expenditures is declining, while a growing number of individuals are opting for loans to maintain their livelihoods and pursue new business ventures. Despite financial strains, many Kenyans remain optimistic about their financial futures.

Recent trends show that over one-third of Kenyans have increased their borrowing, primarily due to escalating living costs and delays in income. This shift signifies a departure from the traditional coping strategy of cutting non-essential expenditures during economic hardships, illustrating a significant change in consumer behavior as individuals face mounting financial pressure.

The Money March report by Tala indicates that as the cost of living burgeons, many Kenyans are now turning to loans to sustain their daily livelihoods. The proportion of respondents who indicated a preference for borrowing over reducing expenditures rose dramatically from 27 percent last year to 46 percent this year, whereas those opting to cut down on expenses dropped from 72 percent to 59 percent.

In addition to increased borrowing, there has been a noticeable uptick in individuals opting to start new businesses as a coping mechanism, growing from 34 percent to 51 percent within the same timeframe. Teddy Kahiro, research manager at Tala, expressed concern regarding this trend, emphasizing that the persistent high cost of living has rendered it nearly impossible for many individuals to make further cuts to their budgets.

The report also reveals that the main motivations for borrowing are business expenses, education, and essential living needs, with approximately 80 percent of borrowers confident in their capacity to repay. Furthermore, individuals have been proactively saving, with many allocating 11 to 20 percent of their income towards investments, primarily aimed at wealth growth or commencement of business ventures.

Despite these financial challenges, optimism remains prevalent among Kenyans. Approximately 46 percent of survey respondents expressed positive sentiments regarding their financial futures, signifying a resilient outlook in the face of adversity. However, the ongoing high cost of living continues to amplify financial stress, with 90 percent of those surveyed reporting financial difficulties within the past six months.

The increasing necessity of borrowing among Kenyans is largely driven by rising living costs and income delays. Traditional coping methods are being overshadowed by an emerging reliance on loans for daily sustenance. Despite these challenges, there remains a sense of resilience and optimism regarding future financial well-being, as many continue to strive for business and property ownership.

Original Source: eastleighvoice.co.ke