Loan Apps in Kenya: The History and Evolution of Digital Credit

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Kenya’s financial sector has experienced a rapid transformation over the past two decades, moving from dependence on traditional banking and informal savings groups to a thriving loan app ecosystem.

The shift was catalyzed by the 2007 launch of M-Pesa, Safaricom’s mobile money platform, which provided millions of unbanked Kenyans with access to mobile transactions. This innovation laid the foundation for digital lending and paved the way for the growth of digital credit in Kenya.

Before this turning point, formal banks reached less than 20% of the population, with Savings and Credit Cooperatives (SACCOs) and informal lenders serving most borrowers. High barriers such as collateral requirements and long approval processes left over 80% of Kenyans excluded from formal finance, as highlighted by FinAccess surveys in the early 2000s.

The history of loan apps in Kenya began in 2012 with the launch of M-Shwari, a partnership between Safaricom and the Commercial Bank of Africa (now NCBA). This pioneering service offered micro-loans accessible via M-Pesa using simple USSD codes, without the need for smartphones.

Disbursal was instant, with repayments deducted directly from mobile wallets. By 2013, M-Shwari had disbursed more than KSh 140 million, proving the viability of mobile-driven, data-based lending.

The evolution of loan apps in Kenya accelerated in 2014 with the introduction of fully app-based lenders such as Tala (then Mkopo Rahisi) and Branch International. These providers leveraged smartphone technology and alternative data, such as SMS records, call logs, and mobile usage patterns, to assess creditworthiness.

Tala began by issuing loans as small as KSh 500, while Branch integrated in-app credit scores to promote transparency. By 2016, more than 50 unregulated digital lenders were active in the country, serving primarily young urban borrowers and informal workers.

By 2019, digital lending had entered the mainstream. According to the FinAccess Household Survey, uptake of digital loans doubled that of traditional bank personal loans, with over 2 million borrowers relying on apps like KCB M-Pesa, Fuliza, and Zenka.

Total outstanding loans surpassed KSh 100 billion, supported by rising smartphone penetration and near-universal M-Pesa usage.

Digital credit broadened access to finance, particularly for women and rural populations, with studies linking small loans to improvements in business activity, income levels, and financial resilience.

However, the rapid growth of the loan app ecosystem brought challenges. Reports from the Competition Authority of Kenya in 2021 showed that average annual interest rates reached up to 280%, leading to over-indebtedness.

Multiple borrowing and aggressive recovery practices, such as debt shaming through phone contacts, raised consumer protection concerns.

The onset of the COVID-19 pandemic further worsened defaults, with Central Bank of Kenya (CBK) data showing that 14 million accounts were negatively listed by Credit Reference Bureaus in 2021.

To address these issues, the government introduced the Digital Credit Providers Regulations, first drafted in 2020 and later enforced by the CBK in 2022. The regulations required licensing, capped monthly interest rates, and demanded transparency in data use and recovery methods.

By 2024, 51 digital credit providers had been licensed, including major players like Tala, Branch, and M-Kopa, while abusive apps such as iPesa were delisted. Alongside this, the Digital Lenders Association of Kenya adopted a code of conduct to promote fair practices.

As of 2025, the digital lending space in Kenya has matured. Over 70 licensed providers operate within a regulated framework, offering innovations like buy-now-pay-later services and asset financing.

The CBK has introduced the KESONIA model to standardize interest rates and improve affordability, while also encouraging responsible borrowing. Uptake has rebounded strongly, with estimates suggesting 10 million active users, though challenges remain in addressing rural access gaps and ensuring sustainable credit usage.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.