Digital Credit Revolution on Customer over Indebtedness: An Accelerator?

Abstract

The sharp increase in the numbers of digital credit providers in Kenya as well as the increased number of people blacklisted at the Credit reference Bureaus (CRBs), greatly informed the need to carry out this study to determine whether there was any relationship between digital credit revolution currently being witnessed and the customer over-indebtedness. The advancement of technology, new innovations in money transfer, as well as the entrepreneurial drive may be factors attributed to the increase of digital credit uptake in Kenya. Financial inclusion has significantly improved since the introduction of M-Pesa mobile financial services into the country by Safaricom Limited in 2007. The innovation in smart phone technology among other innovations improved financial inclusion and introduced digital credit revolution in the country. However, the availability of easily accessible loans through mobile phone, has encouraged people to borrow more than they could afford leading to over-indebtedness. This study used survey research design to collect quantitative data from the study respondents. Stratified sampling was used to obtain a target sample size of 384 respondents who are digital loan users in the informal sector in the Nairobi City County. Binary Logistic Model was used for the analysis of the answers in the structured interview. Pearson correlation coefficient (r) was used to determine the correlation between the two variables. From the findings, the null hypothesis that there was no significant effect of digital credit revolution on customer over-indebtedness was rejected meaning that the huge influx of digital credit providers had indeed significantly increased customer over-indebtedness.

Keywords: Digital Credit Revolution, Customer Over-Indebtedness, Accelerator, Data Protection, Credit Scoring, Fintechs