For too long, we have had a serious problem of household debt in Kenya.

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Every time a new solution is introduced to the fintech market, it is dubbed as the beginning of a new era; this was seen both with the advent of MFIs and that of digital lenders. 

However, disruption can come with unexpected, dire consequences—especially in a highly unregulated market. 

Thus, whether you are currently indebted or simply a fledgling borrower, here is some advice on how to get and stay out of debt in Kenya. 

Financial literacy:

A basic level of financial literacy will allow you to avoid being taken advantage of, and to stay well-aware of the financial solutions available to you. This should allow you to distinguish an opportunity from a scam, and to ask the right questions at the right time.

Avoid digital lenders:

Digital lending Apps will seem especially attractive when you are in financial distress. However, that is also when you are most vulnerable to their incredibly high interest rates (such as M-Shwari’s 138% annual rate) and to their ability to harass your personal contacts. Steer clear.

Budget:

Analysing your expenditure, you should find that you are spending disproportionate amounts on dispensable goods. Re-structure your budget accordingly, redirecting your funds toward your debt repayment. Where possible, taking on a side job or asking friends for help may facilitate the process. 

Manage savings:

This may seem counterintuitive, but managing your savings is key for combating debt traps. Of course, your initial priority will be eliminating the highest loan repayments. However, putting aside some savings will provide you with financial security, reducing your stress and your exposure to risks.

Ask for help!

Finally, asking for help in times of financial distress can help you immensely. There are plenty of people in the same situation, and plenty of people who have made it out.It won’t be easy, but these guidelines should be a good place to start. You can also join the Saccology community in order to seek advice, secure your savings, and refuse to be broke! 

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