Effects of Digital Credit Services on Household Financial Management Practices in Kenya

Abstract

The rapid growth of digital credit services in Kenya has transformed the financial landscape, offering households unprecedented access to short-term loans through mobile phones. While these services have the potential to promote financial inclusion and help households manage financial emergencies, concerns have been raised about their impact on household financial management practices. This study aims to investigate the effects of digital credit services on household financial management practices in Kenya. The study will begin by providing background information on digital credit services and household financial management practices in Kenya, as well as presenting the problem statement, research objectives, and the significance of the study. It will then review the existing literature on digital credit and its effects on household financial management practices, discussing the theoretical foundation of the study, including the Technology Acceptance Theory, Financial Capability Theory, and Behavioural Finance Theory. The study will examine empirical evidence on households’ access to digital credit, their loan uptake and utilization, their loan repayment behaviour, and the general impact on household savings, budgeting, and debt management practices. A conceptual framework will be developed to illustrate the relationships between the key variables of interest. The research methodology will adopt a descriptive research design and utilize qualitative data from questionnaires with key informants. A multi-stage sampling technique will be used to select a representative sample of 400 households across seven counties in Kenya: Nairobi, Mombasa, Nakuru, Kisii, Kiambu, Machakos and Kisumu. Data will be analyzed using descriptive statistics, inferential statistics (including t-tests, ANOVA, and multiple linear regression), and thematic content analysis. The findings of this study will contribute to the growing body of research on digital credit in Kenya and sub-Saharan Africa, providing insights for policymakers, digital credit providers, and households. The study aims to inform policies and interventions that promote responsible lending, consumer protection, and financial well-being among households in the digital credit era.