A Digital Credit Revolution - Insights from Borrowers in Kenya and Tanzania

Digital credit has expanded rapidly in both Kenya and Tanzania, yet there is limited evidence on who is using it, how it is used, and the risks customers face. Two large-scale surveys conducted in Kenya and Tanzania help to fill in this evidence gap. The survey findings suggest that digital credit is not widely used by the most vulnerable groups characterized by irregular cash flows, such as those primarily receiving income through farming and casual work. To serve these segments, digital credit may need to be appropriately and adequately adapted, such as through more nuanced algorithms and flexible repayment structures, time frames, and pricing appropriate for their ability to repay. Alternatively, digital credit may prove unsuitable for these segments, and other solutions will be needed to help them build resilience and meet liquidity needs. The findings and discussions with digital lenders suggest that growth in the digital credit market is driven by a segment of active users who borrow every month or even every week.