The number of shoppers on the buy-now-pay-later (BNPL) financing model has tripled in three years, a new survey shows, reflecting the surge in innovative hire-purchase schemes and the impact of a tough economy.
Buy-now-pay-later or hire purchase programmes are a financing option that allows consumers to make purchases and pay for them over time, typically in a series of instalments.
The use of hire purchase and lipa mdogo mdogo programmes has soared from 2.1 percent in 2021 to 6.2 percent this year according to findings from the 2024 FinAccess Survey published on Tuesday by the Central Bank of Kenya (CBK), the Kenya National Bureau of Statistics (KNBS) and the Financial Sector Deepening Trust (FSD) Kenya.
About 1,751,994 Kenyans were estimated to have used hire purchase or lipa mdogo mdogo services this year compared to 579,242 Kenyans in 2021.
Hire purchase was the top credit-only service by usage, ranking ahead of digital loan applications and traditional microfinance institutions (MFIs).
The use of digital loan applications was largely unchanged at 2.4 percent in 2024 from 2.1 percent three years earlier while the use of traditional MFIs dropped to 0.8 percent from 1.7 percent previous.
Buy-now-pay-later and lipa mdogo mdogo services have gained prominence in recent years, with individuals and households tapping the platforms to acquire assets including smartphones, electronics, and home appliances on credit.
Under the products, customers usually acquire goods on credit with periodic payments set either daily, monthly, quarterly, or yearly.
Service providers, such as Safaricom which initiated lipa mdogo mdogo, have leveraged the buy-now pay-later model to grow the number of smartphones and 4G devices on its network.
The operator has sold over 1.2 million 4 G-enabled devices via lipa mdogo mdogo as of March this year mirroring the popularity of the BNPL mode to fund the ownership of assets.
The rise of buy-now-pay-later has prompted the Treasury to seek the regulation of players, bringing them under the oversight of the Central Bank of Kenya (CBK).
Buy-now-pay-later has been described as an arrangement through which a customer purchases goods or assets, whether secured or not, and pays later in instalments with or without interest.
Other notable providers of BNPL financing include Lipa Later, Aspira, and Loop.
The use of digital credit providers (DCPs) has also soared in the backdrop of the regulation of players in the sub-sector by the CBK.
Mobile money, banks, and informal groups remain the leading financial services products at 82.3, 52.5, and 30.8 percent respectively.
Other top financial services products include insurance, Saccos, pension, Fuliza the Hustler Fund, and securities investments.
Mobile money use rose slightly to 82.3 percent from 81.4 percent while bank use went up to 52.5 percent from 44.1 percent.
