Half of shopkeeper Peter Maina’s customers buy foodstuff and other household items from his shop on credit.

Mr Maina has four categories of customers who shop on loan. Customers, such as owners of food kiosks in Dandora where his shop is located, who buy items on credit which they pay for at the end of the day.

Others, mostly construction workers, settle their debts weekly when they get their wages. Families who live nearby foot their bills at the end of the month once they get paid while others request to be loaned items randomly.

Given that food takes up the lion’s share of household budgets, it is should not be surprising that it eats up much of the loans. For every Sh100 spent by Kenyans, Sh45 goes to food and drinks.

Mr Maina’s customers represent a large number of Kenyans who borrow money to make ends meet, painting a worrying picture of the tough economic times households are grappling with, reveals a review of loans and income data by Nation Newsplex.

Nationally, a third of households seek credit, a four percentage point increase from 2006, according to the Kenya Integrated Household Budget Survey 2015/2016. One in three shilling (39 per cent) borrowed by households is spent on basics such as food, toiletries and water. It is followed by school fees (21 per cent).

Mr Maina says that the number of customers who buy goods from him on credit haphazardly are rising. “Many of my customers are usually destabilised by any increase in the prices of products, so I lend them,” he says.

This trend could be explained by the rising cost of living and stagnant wages in the last few years. From 2010-2017, the average annual inflation rate was 7.6. In contrast, the real average monthly income increased by less than two per cent from Sh31, 213 in 2010 to Sh31, 654 in 2016.

Purchasing power

Real wage is the income of an individual after taking into consideration effects of inflation and purchasing power while inflation is the rate at which prices of goods and services rise over time, resulting in money losing value. That means that with inflation increase, Kenyans spent more money to buy less goods.

Given that food takes up the lion’s share of household budgets, it should not be surprising that it eats up much of the loans. For every Sh100 spent by Kenyans, Sh45 goes to food and drinks, an earlier examination of consumption patterns of Kenyans by Newsplex found.

Nationally, one in three Kenyans say they sometimes go without food due to financial challenges.

Further, figures from the Labour Force Basic Report by the Kenya National Bureau of Statistics show that almost half (48 per cent) of Kenyans are either unemployed or inactive, implying that they rely on other people. This has a ripple effect on the purchasing power of Kenyans, with many spending way more than they earn just to survive. In 2016, the country’s private disposable income was Sh5.5 trillion, but spending was higher at Sh5.7 trillion.

Mr Maina believes that shops are preferred by households because they do not require much paperwork, charge no interest and are given instantly.

He lends items to his customers based on trust. “My customers do not provide a guarantor or any form of collateral. These are the people who frequent my shop and therefore are known to me. However, there are those who buy goods for a while to build trust then request for credit and disappear.”

But Mr Maina says if he refuses to lend his customers they will go elsewhere. “Deciding to only serve those with cash in hand will negatively impact your business as the buying power among residents here is very low, and it also antagonises the community since you’re blamed for not helping people when they are in need of food to eat,” he says

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