Kenya’s digital lending landscape has grown dramatically since the launch of M-Shwari in 2012, reshaping how people access credit. What was once a privilege for the banked elite is now an everyday tool for millions of Kenyans. By 2024, an estimated 8 million people, about 29% of the adult population, had taken at least one digital loan through mobile banking or loan apps in the previous year. Borrowers averaged eight loans annually, highlighting just how deeply these services have penetrated daily life.
A closer look at this trend shows that the youth dominate digital borrowing. Around 62% of users are under the age of 35, with uptake jumping to 34% among those with tertiary education. This means university students have become one of the fastest-growing borrower segments, fueling a new conversation around digital finance, debt, and youth livelihoods.
Why University Students Borrow from Loan Apps
University students borrowing from loan apps often do so out of necessity. For many, government loans through the Higher Education Loans Board (HELB) are either delayed or too small to cover tuition and living expenses, with significant issues occurring in 2025, 2024, 2023, and 2017. Additionally, HELB has faced funding shortfalls over the years, including a Sh13.7 billion gap by late 2025, after receiving only Sh26 billion of the Sh48 billion requested. As a result, over 160,000 eligible students missed out on loans, causing disruptions in universities and leaving many struggling with basic needs.
A 2023 study of Christian universities in Nairobi revealed that 53.9% of students had borrowed digitally, with M-Shwari (21.3%) and Okoa Jahazi (20.7%) topping the list. Strathmore University research reinforced this, finding that campus students borrowing from loan apps primarily use them for “day-to-day needs” (44%) and emergencies (29%).
Accessibility explains much of this appeal. Traditional bank loans require guarantors, paperwork, and a steady income, barriers that exclude most undergraduates. Digital platforms, by contrast, approve loans to university students in minutes using alternative data from mobile money activity and even social media.
The Popular Loan Apps for Students
Tala remains one of the most influential players. With more than 4 million Kenyan users, Tala loans to Kenyan borrowers average KSh 5,000. Many campus students use these loans to pay for food, rent, or transport. Branch and Fuliza follow closely, with Fuliza’s M-Pesa overdraft service embedded into everyday mobile transactions.
Data shows that loans to campus students serve both urgent and aspirational purposes. A Nairobi-based survey found that 52.5% of borrowers sought funds for emergencies such as medical bills or transport to class. Another 33.6% borrowed to support small hustles, selling clothes, providing tutoring, or running micro-trading businesses. Meanwhile, 12.6% of digital borrowing went toward lifestyle spending like gadgets or nights out.
At Kenyatta University, research showed that digital credit often covers basics such as food and clothing, while private university students, hit harder by fee hikes under Kenya’s new funding model, lean on apps when scholarships or parental support fall short.
Opportunities and Economic Impact
Not all borrowing is reckless. Evidence suggests that small digital loans can provide a meaningful boost. A 2025 Berkeley study randomized $40 Tala loans to Kenyan borrowers, finding that recipients increased monthly income by 10% and employment by 5% through investments in small businesses or work tools.
For students, these micro-loans can mean the difference between attending class or staying home. They provide flexibility to buy course materials, pay for internet bundles, or cover transport, without waiting for unpredictable HELB disbursements. A Harvard study supported this finding, noting that 77% of digital borrowers keep their borrowing to small, short-term amounts without spiraling into larger debt.
Among educated youth, digital loans are now the top source of formal credit, accounting for 25% of all loans in active use. A USIU-Africa study even linked positive lending practices such as clear repayment reminders to greater trust, explaining nearly 29% of student borrowing behavior.
Defaults, Harassment, and Debt Traps
Still, the risks are clear. By 2024, Kenya had over 8.2 million digital loans outstanding, and 40% of digital borrowers had defaulted at least once. This rate is far higher than the 16.4% default rate seen with traditional loans. Among students, debt traps are common, with 9% of respondents in the Nairobi Christian universities study reporting they could not repay, and 5% citing dissatisfaction with high interest rates.
Interest charges, which can reach up to 28% monthly, are a heavy burden for students with little or no income. Default often leads to aggressive debt collection practices. Rogue apps have been known to invade borrower privacy, contacting friends and family or sharing borrower details publicly to shame defaulters. A Guardian report highlighted cases of traumatizing harassment, and Facebook groups like Loan App Victims Kenya with more than 3,000 members showing how widespread the problem has become.
Despite these risks, many university students continue borrowing. At USIU-Africa, while analysts estimated only 9.5% of uptake, 76% of students admitted harassment did not stop them from using apps. Yet such experiences erode trust in digital finance, creating a delicate balance between accessibility and exploitation.
Regulation and the Future of Student Borrowing
Regulation is struggling to keep up. In 2022, the Central Bank of Kenya (CBK) issued guidelines to regulate loan apps, capping interest rates and banning unsolicited lending. However, with more than 200 apps in operation, enforcement remains patchy. A 2024 Oxford review described Kenya’s policy response as “slow,” urging the government to combine regulation with stronger financial literacy campaigns.
Some universities are stepping in. Strathmore, for instance, is promoting financial literacy programs to help campus students borrowing from loan apps make more informed choices. Such efforts are crucial as students become a microcosm of Kenya’s digital credit boom.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.