Kenya’s Consumers Stay Resilient in Face of Economic Headwinds

Kenyan consumers shrugged off
macroeconomic headwinds to remain optimistic about their financial
prospects in the third quarter of 2022. According to TransUnion’s Q3
Consumer Pulse Study1 [1], eight in 10 (81%) Kenyans expect their
household incomes to increase in the coming year, while nearly two in
three (64%) say they can pay their current bills and loans in full.

In all, 41% of respondents to TransUnion’s quarterly Consumer Pulse
study [1][1] said their incomes had increased in the previous three
months. Nearly two in three (31%) said their incomes had remained
unchanged, while 28% reported decreased household incomes. Salary
reduction was the top reason (29%) consumers said their household income
had changed in the month preceding the survey, followed by starting a
new business (26%).

These positive signs came despite Kenya’s annual inflation rate
increasing to 8.3% in July 2022, according to the Kenya National Bureau
of Statistics – the highest since June 2017. The main drivers of
inflationary pressure were increases in the prices of food and
non-alcoholic beverages (up 15.3% year-over-year), transportation (up
7%), and housing and utilities (up 5.6%). The increased costs of
necessities are likely to have an impact on consumer spend in the coming
months, according to Weihan Sun, Director of Research and Consulting at
TransUnion Africa.

“It’s likely that inflationary pressure was curbing discretionary
spending among Kenya’s households in the three months leading up to
this survey, and we expect that this trend will continue. However, the
fact that the majority of households are still able to service their
bills and loan obligations is a sign of resilience, especially during
uncertain macroeconomic conditions at a global level,” said Sun.

Of all respondents, 48% said they would make further cuts to their
discretionary spending in the three months following the survey.

Regarding bills and debt management, 46% of all survey respondents who
said they won’t be able to pay a current bill or loan in full intend
to pay a partial amount that’s affordable to them, but not the entire
outstanding balance. Another 41% of those unable to pay indicated
they’ll use their savings to do so, while 40% are likely to borrow
money from a friend or family member to service their current bills and
debt obligations.

Only 35% of Baby Boomers expected to be able to pay their current bills
and loans in full. As older consumers begin to enter retirement, this
challenge is likely to become more ubiquitous due to the limited sources
of disposable income available to service debt obligations among this
age group of Kenyans, said Sun.

Nearly all consumers surveyed (98%) considered access to credit and
lending products important to achieve their financial goals. Most
consumers (60%) surveyed plan to apply for new credit or refinance
existing credit in the next year, led by Baby Boomers, where two-thirds
(68%) intend to do so within the next year, followed by Gen X at 63%,
Millennials at 60% and Gen Z at 56%. The top three credit products among
consumers who said they’ll apply for new loans or to refinance
existing credit in the next year are a personal loan (48%), credit card
(33%), or new mortgage, home loan or bond payment (28%).

Managing financial choices

Two-thirds (65%) of consumers said they conduct up to half of all
transactions (finances, retail and business transactions) online, while
35% of Millennials and Gen X consumers claimed that they conduct most of
their transactions online.

Most consumers (78%) believe monitoring their credit is very or
extremely important, and 77% said they monitor their credit at least
once a month. Younger consumers were more active in monitoring their
credit, with 23% of Gen Z consumers and 22% of Millennials monitoring
their credit daily, compared to 9% of Gen Xers and 5% of Baby Boomers.
Two-thirds (65%) believe their credit scores would increase if
businesses leverage alternative data sets not included on a standard
credit report, like rental payments, gym membership payments, and buy
now, pay later (BNPL) products, among others.

Identity risks and usage

Nearly four in 10 (37%) consumers surveyed said they were unaware of any
digital fraud schemes targeting them in the three months prior to the
survey. A lack of awareness of digital fraud schemes was greatest among
older consumers: 58% of Baby Boomers were unaware of any fraud schemes
targeting them. This is concerning because many could have been targeted
but still be unaware that they had become victims of fraud without
realizing it due to this lack of awareness, said Sun.

Consumers who said they were targeted with digital fraud in the last
three months noted the most common scams as money/gift card scams (50%),
third-party seller scams on legitimate online retail websites (39%), and
fundraising scams (28%). “Consumers and businesses need to stay
vigilant to fraud attempts. In an increasingly digital world simple
steps can make a big difference – something as simple as registering
to receive SMS alerts when there is activity on their credit profile can
make a big difference – empowering consumers with the knowledge to
take action if it was someone else applying for credit in their name,”
said Sun.