Nairobi, April 21 --  Across Kenya, digital loans have integrated into daily economic routines. With a few smartphone taps, households secure instant credit. This innovation has bridged significant gaps in financial access, particularly for informal traders and low-wage earners.

Beneath this convenience lurks a structural challenge that threatens household welfare, labour productivity, and long-term financial stability. As default rates on digital loans surged to as high as 40 per cent in 2024, Kenya finds itself at crossroads where digital credit could either advance financial inclusion or perpetuate cycles of debt vulnerability.

Mobile finance provides fast accessibility with minimal approval requirements. This accessibility has ...