Report: Mobile money loans surge in Kenya amidst growing financial inclusion

A new report by the Global System for Mobile Communications Association (GSMA) has highlighted a significant shift in Kenya and Sub-Saharan Africa, where mobile money has become the preferred source of borrowing for many adults.

GSMA’s State of Industry report indicates that the region is driving a major expansion of mobile money accounts, which now account for nearly two-thirds of the sector’s growth. By 2025, Africa was expected to hold more than 2.3 billion registered mobile money accounts.

Kenya, along with Tanzania and Uganda, leads the world in mobile money account ownership. In fact, the GSMA found that in 2024, 20% of Kenyan adults use mobile money as their sole financial account.

As the number of mobile money users rises, so too does the demand for mobile money loans. The trend reflects a growing disinterest in traditional banking services, with many Kenyans now opting to borrow money via mobile providers instead.

In 2024, mobile money borrowing accounted for approximately 60% of all formal borrowing across Sub-Saharan Africa, with Kenya leading the charge.

The report further revealed that 32% of Kenyan adults had taken out loans from mobile money providers, and 25% of these individuals borrowed exclusively through mobile platforms, avoiding banks, SACCOs, and microfinance institutions altogether.

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These mobile loans are typically low-value and short-term, providing quick access to funds for consumers who may not qualify for loans from formal financial institutions. This surge in demand has allowed mobile money providers to thrive, with mobile money agents playing a critical role in the industry’s growth and digitization.

However, despite the growth, mobile money services are not without their challenges. Fraud remains a major concern, with identity fraud being the most common issue faced by consumers.

The GSMA estimates that nearly $500 billion is lost globally due to fraud, a significant portion of which occurs within mobile money platforms. Common fraud schemes include impersonation, insider fraud from MMP staff, SIM swap, social engineering, and cyber fraud.

In response, mobile money providers have turned to artificial intelligence and machine learning to detect fraudulent activity. AI-driven systems now monitor transactions in real time, flagging unusual patterns and predicting potential fraud before it occurs. Additionally, there are ongoing efforts to raise awareness among users about the risks of digital fraud.

The sector also faces policy-related challenges, such as taxation and inconsistent licensing, which may hinder its continued growth. The GSMA report highlights concerns that taxes on mobile money transactions could negatively impact millions of users, especially in low- and middle-income countries.

In Kenya, the government has rolled out various programs aimed at promoting financial inclusion and expanding access to mobile money credits. One such initiative is the Hustler Fund, a financial inclusion program that disburses loans through mobile money.

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Additionally, the National Youth Opportunities Towards Advancement (NYOTA) Project, in partnership with the World Bank, provides startup capital of Ksh 50,000 to support small businesses across the country.

The government and service providers are working together to ensure that users have access to both financial services and the protection needed to prevent fraud. With mobile money now deeply embedded in Kenya’s financial landscape, it’s clear that this shift towards digital financial services is set to continue shaping the future of banking and lending in the region.

By Obegi Malack

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