Loans and Borrowing

Only about 23% of adults are obtaining loans through banks or formal institutions. Key barriers identified in the study include stringent collateral requirements, high interest rates, and inadequate credit infrastructure. As a result, many individuals turn to informal networks, relying on family and community lending. However, digital credit through mobile platforms is emerging as a viable alternative, providing small, instant loans that are more accessible to low-income populations.

Loan Uptake in the Past 12 Months

The GeoPoll study found that 57% of respondents had not secured a loan in the past 12 months, while 44% reported having taken one. This suggests that although borrowing is relatively common—with more than four in ten respondents accessing credit—the majority remain outside the loan market over the past year. Across the surveyed countries, borrowing behaviours varied: Ghana (37%), Nigeria (36%), and South Africa (34%) reported participation rates around one in three, indicating relatively low borrowing levels. In contrast, Kenya (47%) and Tanzania (46%) showed significantly higher borrowing, while Uganda led with 51% of respondents having taken a loan.

Sources of Borrowing

Among the respondents who secured loans, 36% did not borrow at all in the past year. For those who did, mobile lending apps emerged as the most common source, utilized by 29% of borrowers. This was closely followed by commercial banks (22%), family or friends (20%), and Savings and Credit Cooperatives (SACCOs) or cooperatives (20%). Smaller percentages accessed loans through microfinance institutions (10%), government programs like the Hustler Fund (10%), or other avenues (9%). The reliance on informal moneylenders was notably low, with only 4% borrowing from this source. Overall, mobile-based platforms and formal banks significantly contribute to credit access, while informal and governmental channels play a minor role.

Across the six countries, borrowing sources demonstrated both similarities and differences. Mobile lending apps were predominant, particularly in Uganda (37%), Ghana (33%), Kenya (30%), Tanzania (27%), and Nigeria (26%). South Africa notably leaned more towards commercial banks (29%). Family and friends remained a vital source of credit, with reliance varying from 18% in Ghana to 23% in both Tanzania and South Africa. SACCOs/cooperatives were particularly significant in Kenya (15%) and Uganda (16%), while microfinance institutions provided moderate support in Nigeria (15%), Tanzania (11%), and South Africa (12%). Thus, while digital credit leads regionally, traditional banking and cooperative systems still hold strength in certain markets.

Reasons for Borrowing

The primary motivation for borrowing among respondents was to cover emergencies, cited by 27% of borrowers, indicating the crucial role of credit in addressing unexpected financial strains. Business-related borrowing followed closely, with 23% highlighting the importance of credit for entrepreneurship and income generation. Education was also a significant driver, as 12% borrowed to cover tuition or school fees, revealing how loans facilitate long-term human capital development. Additional reasons for borrowing included basic consumption needs, such as food (7%) and household expenses (5%), with only 3% using loans for asset purchases like land, mobile phones, or appliances.

In examining borrowing behaviour across the six countries, emergencies and business needs consistently emerged as primary motivations, though the specifics varied by market. Emergencies were the leading reason in Ghana (25%), Kenya (27%), South Africa (33%), and Uganda (30%), whereas Nigeria (26%) and Tanzania (26%) saw a greater emphasis on business purposes. Education borrowing accounted for 18% in Ghana and 11% in Uganda, while borrowing for food or household expenses remained secondary, generally under 10% across most nations.

The patterns observed in the GeoPoll survey highlight the multifaceted nature of borrowing in these economies. On one hand, borrowing acts as a vital short-term coping mechanism, enabling individuals to address urgent financial needs and unexpected emergencies. On the other hand, it serves as a strategic instrument for investment in entrepreneurial ventures and educational pursuits, reflecting a commitment to long-term personal and economic growth. This dual functionality illustrates how access to credit not only provides immediate relief but also empowers individuals and communities to build a more sustainable financial future. As such, fostering improved access to credit can enhance financial resilience and stimulate broader economic development across the region.