Marsabit, Garissa and Isiolo and Samburu counties have been said to have the highest proportion of borrowers defaulting on credit, including dues owed to shopkeepers and shylocks.
According to a survey conducted by the Central Bank of Kenya, the four counties ranged between 47 per cent and 74 per cent and more than double the national average of 24 per cent.
Busia, Nandi, Siaya and Nairobi had the lowest default levels.
The findings of the household survey by the CBK, FSD Kenya and the Kenya National Bureau of Statistics (KNBS) show that 50.9 per cent of the respondents with credit defaulted on mobile loans last year.
The northern counties, however, have been worst hit by drought, which has hurt households that depend on livestock as their main source of income.
The four counties are among the 11 identified by the National Drought Management Authority as suffering from acute drought and severe vegetation deficit, which has hit livestock farmers.
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The others are Kajiado, Kitui, Mandera, Laikipia, Tana River, Turkana and Wajir.
“Marsabit, Garissa and Samburu counties recorded the highest level of debt distress proxied by default rates of 74 per cent, 50 per cent and 58 per cent among the adult population, respectively. This may be explained by the climate-related shock of drought facing these counties that have reduced the ability of borrowers to repay their loans,” the survey states.
“Busia, Nandi and Siaya recorded the lowest incidence of loan defaults, all recording below five per cent among the adult population of reported loan defaults.”
Many Kenyans now find they can get loans in minutes, as mobile banking and digital loans are issued without collateral.
Banks rely heavily on algorithms that build a financial profile of customers in the quest to minimize the risk of default while digital and mobile loans are vulnerable to default by borrowers.
Consumers also defaulted on credit chalked up from neighborhood shopkeepers and shylocks as well as family and friends