Kenya households face weaker income and more debt stress

The study paints a picture of households shifting from consumption to survival. Reduced salaries accounted for 27% of reported income pressure, followed by job losses at 24% and weaker business activity at 23%, underscoring how soft labour-market conditions and slowing orders are compressing cash flow. While 78% of respondents still expect income to improve over the next year, that optimism is fading, especially among younger consumers most exposed to unstable work and erratic earnings.

The strain is already showing up in day-to-day finances. Just 61% said they could cover bills and loan instalments, unchanged from a year earlier, while 54% of Generation Z respondents said they could not meet all of their financial obligations, up seven percentage points. For banks, mobile lenders and digital credit providers, that is an early warning that loan growth may be coming at the cost of higher stress in the consumer book rather than stronger balance-sheet health.

The report also suggests Kenyan households are adapting in ways that may support income in the short term but weigh on consumption over time. Half of respondents unable to pay at least one bill in full said they would make partial payments, while another half planned to take on gig work. More than half expect to cut discretionary spending on dining out, travel and entertainment, 48% plan to delay large purchases and 40% want to trim retail outlays. At the same time, 41% said essential bills and repayments will absorb more of their budgets, leaving less room for non-essential spending.

That is economically important because consumer caution can feed back into slower growth for merchants, lenders and service businesses that depend on household demand. It also means the headline growth in financial inclusion is becoming less impressive as a measure of resilience. Kenya’s 2024 FinAccess survey found formal access had risen to 84.8%, but only 18.3% of adults were financially healthy, and 16.6% of borrowers had defaulted outright, up from 10.7% in 2021. In other words, more people are inside the financial system, but many remain one shock away from distress.

Borrowing behaviour is becoming more conservative, though not less dependent on credit. TransUnion said the share planning to apply for new loans or refinance existing ones fell to 57% from 69% a year earlier, even as 73% still viewed credit access as very important. Personal loans remain the preferred product, but interest in mobile loans has risen to 45% and 27% of prospective borrowers are looking at buy now, pay later products, reflecting continued demand for short-duration, unsecured credit.

For lenders, that mix is a double-edged sword. On one side, it preserves loan demand in a slowing economy; on the other, it points to greater exposure to borrowers with thin buffers and volatile cash flows. The risk is especially relevant as Kenya’s digital credit market expands. Central Bank of Kenya data show outstanding loans from digital credit providers almost doubled to Sh110.1 billion in December 2025 from Sh55.2 billion a year earlier, with licensed providers rising to 195 from 85 and loans jumping 71% to 6.74 million.

Fraud adds another layer of fragility. TransUnion found 77% of respondents were targeted by attempted fraud in the previous three months, even though the share reporting actual victimisation eased to 9% from 10% a year earlier. For a market increasingly reliant on mobile payments and online lending, that raises operating and trust costs for lenders and payment providers, while nudging consumers toward more defensive behaviour.

The broader narrative is that Kenya’s credit boom is colliding with weak income growth. Households are not rejecting the financial system; they are using it more selectively and under greater pressure, leaning on gig work, family support and smaller borrowing decisions to bridge gaps. For investors, the key implications are slower consumer spending, tighter repayment capacity and a more selective outlook for banks, fintech lenders and retailers with exposure to lower-income borrowers. The next test will be whether wages and formal job creation can recover enough to ease the need for emergency hustles — or whether rising debt service and caution keep Kenya’s consumer under strain into 2027.