1. Mobile Credit and the Normalization of Debt
East Africa’s mobile money infrastructure has laid the foundation for the explosion of digital credit. In Kenya, M-Pesa enabled millions to send and receive money without a bank account. In Uganda and Tanzania, Airtel Money, MTN MoMo, and Tigo Pesa have similarly transformed financial access. Buildings on this infrastructure, mobile loan platforms have flourished, extending credit to users with no credit history or formal employment.
This success story however masks a new vulnerability. Mobile loans have shifted from being occasional tools to becoming routine coping mechanisms. Borrowers now rely on these loans to manage everyday needs rather than productive investments. Fuliza, Kenya’s most used overdraft facility, processes nearly 18 loans per second (Business Daily, 2023). Over 80 percent of digital loans in Kenya are used for essentials like food and rent rather than business purposes (African Journal of Economic and Management Perspectives, 2023).
The pattern of borrowing to repay other loans, known as debt stacking, is becoming increasingly common. Informal workers borrow from Tala to repay Zenka, or from Branch to clear Fuliza. This creates a closed loop of borrowing without financial recovery. According to CGAP (2023), 83 percent of digital borrowers experience financial stress from repayment obligations, indicating that digital credit has become less a tool of empowerment and more a sign of systemic desperation.
2. Gender Disparities and the Burden on Informal Workers
Women carry a disproportionate share of this digital debt burden. Across East Africa, women account for approximately 75 percent of informal workers (United Nations Economic Commission for Africa, 2023). In Kenya, nearly one in three women depends on informal jobs such as vending, domestic work, or micro-retail (FSD Africa, 2023). These jobs offer little stability, and mobile credit often becomes the only fallback during delayed payments or medical emergencies.
Despite their central role in informal economies, women remain digitally excluded in many ways. In Kenya, 43 percent of women cite limited access to mobile phones as a barrier to using digital financial services, and in Uganda, smartphone ownership and data affordability remain critical constraints (African Economic Research Consortium, 2023). These barriers limit women’s ability to navigate, question, or reject unfair loan terms. The result is an unequal digital credit landscape that reinforces, rather than reduces, gender disparities in financial access and outcomes.
Evidence further suggests that digital credit is widening Kenya’s gender gap in financial inclusion. Standardized loan products, low digital literacy, and patriarchal norms are key barriers that limit women’s agency in the digital finance space (Klapper & Lusardi, 2023).
3. Financial Literacy and the Information Divide
Many borrowers do not fully understand how interest accumulates, how penalties are triggered, or how repeat borrowing affects long-term debt levels. A study by the Kenya Bankers Association (2022) found that only 25 percent of digital borrowers clearly understood how their loans worked. Most are unaware of the cumulative costs of rollover loans or interest compounding.
This gap is widened by the persuasive design of mobile loan applications. App features such as push notifications, auto-top-up prompts, and repayment reminders foster a cycle of repeat borrowing. These design tactics are not neutral. They guide user behaviour toward dependency, often without full transparency. As CGAP (2023) notes, this behavioral nudging creates a situation where users are constantly prompted to borrow, even when they are already overextended.
The result is a shift in power from borrower to lender. What is marketed as a financial service becomes a source of manipulation. In the absence of clear protections or informed consent mechanisms, the digital credit market fosters confusion rather than clarity.
4. Regulatory Gaps and Regional Fragmentation
Kenya has taken important steps to regulate digital credit providers. The Central Bank of Kenya now requires lenders to register, prohibits debt shaming, and enforces basic disclosure of loan terms (Kenya Institute for Public Policy Research and Analysis, 2023). Despite these efforts, enforcement is inconsistent. Some platforms rebrand or relocate to avoid compliance (Quartz Africa, 2023).
Uganda has made stronger legal strides. The Tier 4 Microfinance Institutions and Money Lenders Act set a maximum interest rate of 2.8 percent per month and caps default penalties at 50 percent of the principal. It also mandates borrower consent before data sharing and requires clear loan communication (Uganda Microfinance Regulatory Authority, 2024). However, data privacy violations and unethical debt collection practices continue, particularly in rural areas (SSRN, 2024).
Tanzania has also introduced guidelines for digital lending, including an interest rate recommendation of 4 percent per month and requirements for ethical collection (Bank of Tanzania, 2024). Yet these guidelines are not enforceable by law, and many platforms continue to operate without licenses.
These fragmented responses leave East African borrowers vulnerable to exploitation. Without harmonised regional standards and stronger enforcement mechanisms, digital lenders can shift operations across borders to avoid accountability (UNCDF, 2024).
5. Social and Psychological Costs
The personal impact of digital debt extends beyond financial strain. Borrowers increasingly report harassment by lenders through phone calls, threats, and public exposure. According to the Competition Authority of Kenya (2023), digital lenders have frequently accessed users’ contact lists to inform family and friends of loan defaults, violating data privacy laws.
These practices contribute to a climate of fear, stress, and humiliation. Mobile phones, once instruments of empowerment, now trigger anxiety. The psychological effects include depression, relationship breakdowns, and a deep sense of powerlessness. For many low income borrowers, mobile credit has become a financial and emotional liability.
Additionally, the need to maintain mobile access for loan repayments and reborrowing is influencing broader patterns of labour and mobility. A 2024 GeoPoll survey found that digital credit penetration has increasingly shaped household financial decision-making in both urban and rural communities across East Africa, affecting choices around employment, migration, and expenditure.
Mobile lending in East Africa has moved beyond its earlier promise of inclusion. While digital credit has expanded access, it has also entrenched risk, widened gender disparities, and exposed millions to financial distress. The growth of invisible debt signals a shift in the region’s development trajectory from financial innovation to digital dependency. Unless addressed through coordinated regulation, targeted awareness campaigns, and ethical platform design, the rise of digital credit may represent not progress but precarity.
Policy Recommendations
1. East African governments should harmonise digital lending laws across the region. A regional framework can prevent regulatory loopholes and cross-border exploitation by lenders.
2. Central banks in the region must strictly enforce interest rate ceilings, transparent disclosure standards, and consumer protection policies. Licensing alone is not enough without routine monitoring and penalties for non-compliance.
3. National financial education campaigns should focus on low income earners, women, and informal workers. These efforts must include basic digital literacy, interest rate calculation, and debt management skills.
4. Civil society organizations should be supported to monitor financial technology (Fintech) practices, raise awareness, and provide redress mechanisms for affected borrowers. Development partners can fund ethical innovation pilots that align Fintech with social protection goals.
5. Digital lending platforms should redesign products with borrower well-being in mind. Features such as flexible repayment, voluntary opt-ins, and interest caps should be integrated into platform design to reduce harm and promote financial resilience.
References
African Economic Research Consortium. (2023). Gender differences in financial inclusion in East Africa (AERC Research Paper No. 446). https://publication.aercafricalibrary.org/server/api/core/bitstreams/e361b9ec-9716-4e8c-828a-abb33c149d45/content.
African Journal of Economic and Management Perspectives. (2023). Mobile loans as financing options in Kenya. African Economic and Management Perspectives.
Bank of Tanzania. (2024, September 24). Publication of guidance note on digital lenders under Tier 2 microfinance service providers, 2024 [Press release]. Bank of Tanzania. https://www.bot.go.tz/Adverts/PressRelease/en/2024092508330995.pdf
Business Daily. (2023, December 10). Alarm as easy digital loans yoke more Kenyans to debt. Business Daily Africa. https://www.businessdailyafrica.com
Consultative Group to Assist the Poor. (2025). Advancing women’s financial inclusion: Guidelines to adopt a gender perspective in financial institutions. CGAP. https://www.cgap.org/research/publication/advancing-womens-financial-inclusion-guidelines-to-adopt-gender-perspective-in
Competition Authority of Kenya. (2023). Consumers’ financial health: Key lessons for digital lenders. Competition Authority of Kenya.
FSD Africa. (2023). Ensuring women’s financial access is not another casualty of COVID-19. Financial Sector Deepening Africa.
GeoPoll. (2024). Mobile penetration and internet usage in Tanzania. GeoPoll.
Kenya Bankers Association. (2022). Digital credit, financial literacy and household indebtedness. Kenya Bankers Association.
Kenya Institute for Public Policy Research and Analysis. (2023). Regulation of digital credit providers in Kenya: Policy issues and options. KIPPRA.
Klapper, L., & Lusardi, A. (2023). Digital credit and the gender gap in financial inclusion. Journal of International Development, 35(1), 123–140.
Dahir, A. L. (n.d.). Digital lending apps are coming under scrutiny in East Africa for predatory practices. Quartz Africa.
SSRN. (2024). Data protection in Uganda’s digital lending landscape. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4990624
Uganda Microfinance Regulatory Authority. (2024). Digital lending guidelines. UMRA. https://umra.go.ug/digital-lending-guidelines/
UNCDF. (2024). Navigating Uganda’s consumer protection landscape. United Nations Capital Development Fund. https://policyaccelerator.uncdf.org
United Nations Economic Commission for Africa. (2022, September). African women’s report 2021: Digital finance ecosystems: Pathways to women’s economic empowerment in Africa. Addis Ababa: Author. Retrieved from https://repository.uneca.org/handle/10855/48741