At the height of the pandemic last year, roughly 4.5 million customers took loans via the digital lending platform, M-Shwari.

The ability to borrow to make ends meet during the Covid-19 pandemic became almost impossible as shopkeepers were turning away clients seeking everyday goods on credit.

Researchers at Financial Sector Deepening-Kenya, who conducted phone interviews during the entire time, discovered that facing significant uncertainty, most shopkeepers stopped extending credit and most chamas (savings groups) paused their operations.

One case named B to hide their identity was specifically painful as he lost his work after his employer, a foreign national, packed up and went back to their country at the onset of the pandemic.

At the start of the pandemic, countries banned international flights excluding cargo flights while other countries repatriated their nationals a move that saw many foreigners leave.

For B this meant he was left jobless in the middle of the pandemic and he needed food for his family. As fate would have it, he turned to his local shop where every good he took was marked until the debt hit Kes 1,800.

At the end of the month when he failed to settle his debt, the shopkeeper took him to the area chief and negotiated a deal to work at the shopkeeper’s farm until his dues were paid or he would try to get it paid by other means.

He chose to sell his cow instead and came to the market with the desperation that saw him exploited, earning half of the beast’s value.

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“He got only Kes 19,000 instead of the Kes 35,000 they were worth pre-Covid,” FSD Kenya said in the report Surviving 2020: Lessons on resilience from Kenya’s Covid diaries.

While Kenyans have traditionally relied on families and friends, chama’s and the local shop to borrow, Covid-19 made it even harder.

Families were either in the same financial constraint or were hoarding the little they had for basic survival in times of uncertainties.

Friends had either been rendered jobless or were coming to terms with salary cuts that saw a spike in loan defaults, rent and power bills.

Kenya National Bureau of Statistics shows that in just three months as many as 1.7 million Kenyans found themselves without a job as employment fell to 15.87 million between April and end of June compared to 17.59 million the previous quarter.

Banks, Saccos and chamas also cut loans as defaults went through the roof.

The FSD survey discovered that like B, most common difficulties in Kenya were borrowing money, cutting food expenses and taking goods on credit.

An estimated 60 per cent of members were forced to dispose their assets, espescially livestock, a traditional form of saving in Kenya.

Some chamas, however, relaxed conditions to allow members to repay the amounts they could, others maintained strict repayment conditions, fearful that the volume of long-term bad loans could go up.

For similar reasons, chama’s were reluctant to extend new loans to members in difficulty, with the number of new loans disbursed falling considerably.

The tough conditions revealed the underbelly of social capital during difficult times.

Social capital gives people access to cheap, flexible loans but at times of difficulty are limited and end up creating shame of having to tell everyone your problem just because you need some money.

It is no wonder Kenyans turned to digital loans which while they are impersonal, will offer you credit without telling the whole world, effectively allowing one to recover in peace.

At the height of the pandemic last year, roughly 4.5 million customers took loans via the digital lending platform, M-Shwari.

In fact, men who are usually very sensitive about exposing their cash woes, were the biggest borrowers accounting for 56 per cent of monthly disbursements while women accounted for 44 per cent in 2020.

While delay in loan repayments were mostly due to disrupted incomes due to the economic effects of COVID -19 pandemic, M-Shwari did not see too many defaulters since it has been in operation for over eight years and has mastered the habits of borrowers.

About 19 per cent of the loans are repaid by day 30, an estimated 92 per cent by day 60 and 95 per cent by day 90. Thus, day 90 NPL as at the end of 2020 was around 4.6 per cent.

This meant that unlike banks and unregulated digital providers, who were risk-averse and stopped lending, M-Shwari continued to provide a reliable platform for millions of borrowers.

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