Tanzanians are more likely to default on their digital loans than Kenyans as digital credit in Kenya and Tanzania continue to experience explosive growth.
According to a recent report by FSD Kenya, the number of Kenyan and Tanzanian mobile phone owners that have borrowed from any digital lender stands at 35 per cent and 21 per cent respectively.
There are 49 loan apps in the country with M-Shwari leading the pack followed by KCB M-Pesa at twelve per cent, Equity Eazzy at four per cent, Tala at 1.8 per cent, and MCo-op Cash at 1.3 per cent.
On the other hand, ten per cent of mobile phone owners in Tanzania have borrowed from M-Pawa while eight per cent have borrowed from Timiza. Other lenders such as Nivushe hold a six per cent market share while both Branch and Tala control a market share of 0.1 per cent.
Meeting day-to-day household needs and business reasons are the two main reasons that push mobile owners to take out mobile loans.
35 per cent of Kenyan digital borrowers use digital credit to meet day-to-day household needs while 37 per cent borrow for business reasons. In Tanzania, 36 per cent of borrowers use digital credit for buying airtime while 37 per cent use it for meeting day-to-day needs.
In Kenya, 47 per cent of borrowers repaid their loans late compared to 56 per cent in Tanzania while twelve per cent of borrowers defaulted on their loans in Kenya compared to 31 per cent in Tanzania.
Once they defaulted on their digital loans, 20 per cent digital borrowers in Kenya cut down on their food purchases in order to repay loans while 16 per cent borrow money to repay loans.
In addition, six per cent skipped paying school fees to repay loans while five per cent and four per cent sold assets and forwent medical treatment respectively to repay loans.
Digital borrowers are also more likely to participate in mobile betting than non-digital borrowers, according to FSD Kenya.