The Necessity of Borrowing Amid Rising Living Costs in Kenya

Over one-third of Kenyans are increasing borrowing due to rising living costs. While traditional strategies like cutting expenditures are declining, many are relying more on loans and entrepreneurship to cope. The Tala report underscores this shift, revealing a growing trend towards borrowing for essential needs and a positive outlook despite financial challenges.

In Kenya, more than one-third of citizens are increasing their borrowing due to rising living costs and income delays. Historically, Kenyans have coped with tough economic times by reducing their expenditures; however, this approach is shifting. The latest Money March report from the digital lender Tala reveals that many individuals are now turning to loans as their primary means of sustaining their livelihoods, as they struggle to cut non-essential spending further.

The report underscores a significant change in consumer behavior: the percentage of those willing to cut down expenditures fell from 72 percent to 59 percent, while the proportion of individuals borrowing more rose from 27 percent to 46 percent. Additionally, those starting new businesses as a coping mechanism increased from 34 percent to 51 percent. Teddy Kahiro, Tala’s research manager, noted that the persistent high cost of living is leading many to view borrowing as a necessity.

The report indicates over one-third of Kenyans have turned to borrowing, primarily for business expenses, education, and daily living needs. Annstella Mumbi, Tala-Kenya’s general manager, mentioned that about 80 percent of borrowers feel confident in their loan repayment abilities. Respondents highlighted business and home ownership as their top financial goals over the next five years, with a significant number allocating 11 to 20 percent of their income for savings and investments to grow wealth or retire.

Challenges such as fear of loss and distrust in investment platforms hinder saving and investing among Kenyans. The report also noted a 7 percent increase in business ownership in 2025, while full-time employment as a primary income source has declined by 5 percent year-on-year. Additionally, both full-time and part-time workers are pursuing fewer secondary income-generating ventures, restricted by the high cost of living.

Despite current financial challenges, the resilience of Kenyans shines through, as approximately 46 percent feel optimistic about their financial futures. The high cost of living continues to be a pressing issue, with around 90 percent of respondents reporting financial difficulties in the past six months, yet maintaining a hopeful outlook for what lies ahead.

The shift in borrowing trends among Kenyans reflects the increasing financial strain caused by rising living costs. As traditional coping mechanisms diminish, loans have become essential for many households to maintain their livelihoods. Despite the challenges, there is palpable optimism about future financial conditions, demonstrating a resilient spirit among the populace as they navigate their economic landscape.

Original Source: eastleighvoice.co.ke