In a Juja market, a fruit vendor named Amos Kiplangat taps his phone and secures an instant loan to stock his stall, no paperwork, no bank officer—just an app.
Within seconds, an AI-powered credit scoring algorithm has analyzed his mobile money transactions, airtime top-ups, and even how promptly he pays his phone bill. The loan is approved, and the money lands in his M-Pesa wallet.
This is a snapshot of Kenya’s digital lending boom, where fintech lenders are revolutionizing credit scoring using artificial intelligence to bring millions of “credit-invisible” Kenyans into the financial system. The journey is data-driven, fast-paced, and comes with its own set of ethical and regulatory challenges.
Traditional credit scores rely on bank loans, payslips, or credit card histories, things many Kenyans don’t have access to. Today’s lending apps assess creditworthiness by analyzing digital footprints: mobile money usage, phone habits, social media activity, and e-commerce behaviors. If it’s on your phone, it could be used to assess your loan eligibility.
Fintech giants like Tala and Branch are leading the charge with AI models that sift through hundreds of data points from users’ smartphones. Tala’s app, for instance, looks at everything from your phone’s make to how regularly you pay utilities, using over 250 micro-indicators to create a personalized credit score.
It’s not spying; users opt in, providing their data in exchange for the chance to borrow. Branch does something similar, using data like handset details, SMS logs, GPS, and contact lists to find patterns in repayment behavior. According to Matthew Flannery, CEO of Branch, using machine learning to analyze alternative data helps predict loan repayment in regions with limited credit bureau coverage.
The advantage of these AI systems is their adaptability. As users take out and repay loans, the AI refines their credit scores. Building a positive borrowing history leads to larger loans with better terms, offering a dynamic, real-time scoring system.
This speed and convenience have made digital lending incredibly popular, with even Kenya’s largest telco, Safaricom, joining the trend through services like M-Shwari and Fuliza.
However, the rapid growth of AI-based lending has raised ethical and regulatory concerns. Questions are being asked about data privacy, algorithmic fairness, and transparency. While Kenya has taken steps to regulate data use through the Data Protection Act (2019) and the Central Bank of Kenya’s regulations for digital lenders (2022), more work is needed.
Experts are calling for audits of algorithms to prevent bias and ensure fairness in the lending process. There’s also a push for the creation of guidelines to govern the ethical use of AI in credit scoring.
Kenya’s experience shows that AI can be a powerful tool for financial inclusion. Every day, thousands of Kenyans are gaining access to loans they would otherwise be denied by traditional banks, thanks to algorithms that assess their potential rather than their history.
Yet, as the country embraces this technological revolution, the question remains: who ensures these algorithms operate fairly? For Kenya’s credit revolution to be sustainable, it will need a balance of innovation, ethical oversight, and regulatory frameworks.
