Soaring Living Costs Drive Surge In Digital Lending

The rising cost of living is pushing more consumers to rely on digital lending, with savings habits rebounding slightly but investment barriers still holding back many potential investors.

The latest MoneyMarch 2025 report by digital lender TALA highlights key financial trends, including a growing dependence on digital loans, shifting savings motivations, and persistent challenges in digital investment adoption.

According to the report, 92 percent of borrowers in Kenya now turn to digital lending platforms, a significant increase from previous years. Traditional banks (32 percent), family/friends (26 percent), and cooperatives (21 percent) account for a much smaller share of lending sources. Most borrowers seek loans to cover business expenses, education, and daily necessities, indicating financial strain caused by inflation and rising household costs.

“Digital loans provide fast access to funds, but over-reliance on them may lead to deeper financial challenges, especially when borrowers juggle multiple lenders,” the report notes. Despite high confidence in managing debt, some consumers remain uncertain about their financial stability.

The report shows an uptick in saving habits after a dip in 2024, driven by financial security concerns. Traditional savings methods remain the preferred option, with consumers prioritizing savings for emergencies, business capital, and education. However, with high household expenses, savings allocations remain limited.

“Consumers are prioritizing financial security, but rising living costs continue to restrict how much they can set aside,” the report states. While savings are recovering, they are still not sufficient to build long-term financial resilience.

The Investment Gap and Digital Trust Issues

While 57 per cent of consumers have used digital platforms for investment, low income, fear of loss, and security concerns remain significant barriers. Many potential investors hesitate due to trust issues with digital platforms, highlighting the need for more secure and transparent investment options.

Despite these hurdles, consumers remain optimistic about their financial future, with home ownership and entrepreneurship ranking as top financial goals over the next five years.

As digital financial tools continue to evolve, experts suggest that improving financial literacy, enhancing digital security, and offering user-friendly investment solutions will be crucial in encouraging more consumers to save and invest wisely.

Speaking to financial stakeholders and media during the report’s release, Annstella Mumbi, General Manager of Tala-Kenya, said that “As we release these  findings and launch MoneyMarch 2025, I want to emphasize that financial empowerment is not reserved for the privileged few; it is a right that belongs to all of us. Whether you are a student, an entrepreneur, a business owner, or someone looking for a fresh financial start, this campaign is for you”.

Giving the keynote address, Boniface Kamiti, Manager – Consumer Protection at the Competition Authority of Kenya, said that “the Competition Authority of Kenya urges all digital credit providers, to see your role not just as providers of credit but as partners in the financial well-being of your customers. Invest in customer education, helping borrowers understand how to use credit responsibly and build their financial futures”.

This is the fifth instalment of Tala’s annual MoneyMarch campaign, aimed at empowering everyday Kenyans with the education, tools, and finances needed to unleash their economic power, reduce poverty, and strengthen the broader economy.