Rising Living Costs Push Kenyans into Debt for Basics

A recent Financial Wellness Monitor Report by Old Mutual has shown that an increasing number of Kenyan households are taking on debt simply to meet their daily needs.

Families across the country are borrowing not for investment or long-term planning, but to pay for essentials such as food, transport, rent, and school fees. The trend reflects the growing gap between household incomes and the rising cost of living, with many households struggling to make ends meet.

The report launched on Wednesday, March 25, highlighted that most families now live on very tight budgets. After paying monthly bills, a majority have little to no money left for savings or emergencies.

The pressure is felt across income levels, with both low- and middle-income households relying on credit to cover basic expenses. Education remains a major financial burden, as parents borrow to pay school fees and other costs associated with keeping their children in school.

In some cases, borrowing has become a cycle, with households taking out new loans to repay older debts. This pattern shows how many families are trapped in financial stress, unable to use credit to improve their financial situation, but rather using it as a lifeline to stay afloat.

Small business on debt

Small businesses are also feeling the strain. Entrepreneurs often rely on loans to purchase stock or equipment, highlighting both the ongoing entrepreneurial activity in the country and the difficulty many face in accessing affordable formal financing. For households unable to borrow from banks or mobile lenders, informal options such as borrowing from family, friends, or savings groups remain crucial.

Even savings, once a safety net, are being depleted. Many households are dipping into their own reserves to cover urgent expenses, which erodes financial resilience and leaves families vulnerable to future shocks.

Housing costs add another layer of pressure, especially in urban areas where rent consumes a significant portion of household income. Falling behind on rent has become a reality for many families, compounding the stress of everyday life.

High debt levels are affecting both financial stability and overall well-being. Households are forced to make difficult decisions, such as cutting expenses, postponing major purchases, switching to cheaper goods, or relocating to more affordable housing. Despite these measures, the financial burden remains heavy, with many families finding it difficult to regain stability.

Still, Kenyan households are striving to plan for the future.

Savings goals for education, home ownership, and business development remain a priority, even in the face of ongoing economic strain. Optimism persists, as families hope that incomes will improve or business conditions will get better in the near term.