• According to a recent survey by Financial Sector Deepening (FSD), one in five Kenyans is trapped by bank loans.
  • Farmers who form the bedrock of the country’s economy are the worst-hit by the debt crisis, the survey found out.
  • Availability of Mobile-based digital lenders such as Tala, Branch and OKash, which don’t require any security has further complicated and worsen the problem.

Debt is one of life’s scariest nightmares yet it is so common and so many people nowadays live from paycheque to paycheque.

According to a recent survey by Financial Sector Deepening (FSD), one in five Kenyans is trapped by bank loans. The survey on indebtedness was backed by the Kenya National Bureau of Statistics (KNBS) and Central Bank of Kenya data. 

KNBS boss Zachary Mwangi speaks at the launch of 2019 mock census

Farmers who form the bedrock of the country’s economy are the worst-hit by the debt crisis, the survey found out.

“Levels of debt stress are high across the board but particularly for farmers, the elderly and the poor. For these groups, difficulties in repaying loans resulted in asset sales, cutting back on expenditure, or borrowing to repay existing loans,” says the FSD Kenya study published late last month.

Central Bank of Kenya Governor Patrick Njoroge

Borrowers of personal loans and small business owners contributed nearly half of the Sh264.6 billion ($2.646 billion) stock of total bad debt held by banks in 2017, according to CBK data.

Availability of Mobile-based digital lenders such as Tala, Branch and OKash, which don’t require any security has further complicated and worsen the problem.

Tala mobile app.

In March last year, a separate study by FSD-Kenya showed the proliferation of digital loan platforms had not improved lives. Instead, the survey showed, many Kenyans had become prisoners of these systems, in some instances borrowing to gamble or settle previous debts.

Considering that it is easy to despair, especially if one has an outstanding loan. With discipline and a little lifestyle change, however, one can turn their fortunes around.

Here are some practical tactics you can use to become debt free.

Create a Budget

Budgeting. (courtesy)

They say, failure to plan is planning to fail and the same is true about money. Every coin count in debt and in order to get out of it you need to write down a strict budget and follow it to the letter.

A budget will help you separate your needs and wants. Basic needs include rent and utilities, transport costs, food, and clothing. Anything else is a want.

Create a flexible payment 

A phone calendar

After creating a budget, the next thing one needs to do is negotiate their debts so as to be able to come up with a flexible payment schedule.  

This will ensure that one does not sink deeper into debts by avoiding further penalties. You can always negotiate with your debt collector to either make lower payments per every payment or flexible instalments or even discounted interest rates.

Change Your Spending habits

Getting out of debt is easier said than done.

Getting out of debt is easier said than done. One needs to also change their behavior towards money in order for any tangible results to be seen.

You have to learn how to spend what you already have before earning more. Learn to spend less than you earn and live within your means. 

Kenyan Billionaire businessman, Chris Kirubi says he hardly ever eat out but when he goes out he make sure that it is of value to him. 

“If for example I am going to meet a business partner or an investor then it is a worthy investment to eat out.”

Live a frugal life

Live a frugal life

Lastly, in order to start your debt-free journey, you‘ll have to cut your expenses aggressively and redirect them into loan repayments and setting up an emergency fund.

Slashing non-essential expenses like Pay Tv, internet, eating out and foregoing buying new clothes can be a good start.