Borrowers have been urged not to take loans to fund expensive lifestyles since such debt has exposed many Kenyans to a cycle of debt and financial strain.
The ruin that followed such financial decisions saw Family Bank Chief Executive Officer and Managing Director Nancy Njau issue a warning during the MyChat with a Bank CEO interview session, where she urged borrowers to distinguish between loans that generate income and those used to finance consumption.
According to Nancy, who joined the financial sector about 24 years ago, she is among those who were eager to afford expensive clothes, shoes and a comfortable lifestyle. Instead of saving from her first salary, she committed much of it to acquisitions and went ahead to even borrow money from another person.
This single move left her with a loan and a separate debt she had to repay. She now describes it as her first financial mistake, adding that she learnt to manage her money differently over time.
She warned that some borrowers make the same mistake by taking loans to finance lifestyles, rather than investing in activities that create wealth.
“It's like you borrow to fund a lifestyle so that you can impress someone you actually don't like,” she said.
Nancy urged Kenyans to first examine the purpose of any loan before taking any debt instrument and establish how they intend to repay it.
She cautioned against taking new loans from digital lenders to settle existing debts, saying the practice can trap borrowers in a cycle of borrowing.
“Is it a need, or do I want to fund a lifestyle? Am I funding what I want? And how am I going to repay it?” she posed.
Debt must have a clear purpose, particularly where it is intended to support an investment or business. For entrepreneurs, she said a loan could help bridge a cash-flow gap or enable a business to take up an opportunity with an identified buyer and a clear repayment plan.
She gave the example of a business that has secured a supply contract but needs money to purchase goods before delivery.
Another option, she explained, is invoice discounting, where a business accesses funds against an invoice while waiting for a customer to pay.
However, she cautioned business owners against borrowing without assessing the cost of credit and the effect of repayments on their cash flow.
The Family Bank boss also advised consumers to check the total cost of a loan instead of focusing on the advertised interest rate. She cited a loan charging 5 per cent a month on a flat-rate basis, saying borrowers could end up paying an annualised rate of 60 per cent. Her warning comes as more Kenyans rely on credit while fewer report saving.
The 2024 FinAccess Household Survey, conducted by the Central Bank of Kenya, the Kenya National Bureau of Statistics and Financial Sector Deepening Kenya, found that credit use rose from 60.8 per cent in 2021 to 64 per cent in 2024.
The proportion of adults who saved fell from 74 per cent to 68.1 per cent over the same period.
The survey also found that the share of borrowers who defaulted on loans increased from 10.7 per cent in 2021 to 16.6 per cent in 2024.
In March 2026, the default rates stood at 15.5 per cent to 15.6 per cent as commercial bank average lending rates eased down to around 14.5 per cent to 14.4 per cent from higher peaks in late 2024 and 2025.
To improve financial discipline, Njau recommended setting aside savings before spending rather than saving whatever remains at the end of the month.
She outlined a budgeting model in which 50 per cent of income goes towards basic needs, 20 per cent towards savings, another 20 per cent towards debt repayments and other obligations, while 10 per cent is set aside for leisure.
She also encouraged people to track their spending for one month, including small expenses such as airtime, data, mobile-money transaction charges and social outings, to identify where they could cut costs.
Njau further cautioned investors against putting money into ventures they do not understand or schemes promising unusually high returns.
She advised consumers to check whether an investment is regulated and to assess the risks before committing their savings.
She urged investors to diversify rather than tie all their money in one asset, noting that some investments may be difficult to access when an emergency arises.
The Family Bank CEO encouraged young people to start preparing for retirement from their first day of employment, saying small, consistent contributions could grow over time.
On insurance, Njau described cover as a way of protecting wealth against risks such as illness, accidents and damage to businesses. She said medical expenses could drain a business's cash flow if an owner did not have health insurance.
She also encouraged people to consider savings groups and investment clubs, saying they could help members build capital and develop a savings culture. However, she cautioned that members should assess the people they are pooling money with because some borrowers may disappear without repaying funds.
Nancy observed that financial discipline was not determined by how much a person earns but by how they manage their income.
She advised Kenyans to avoid increasing their spending every time their earnings rise and to live below their means.
