TITLE:
The Role of Digital Loans in Improving or Undermining Financial Well-Being in Kenya
AUTHORS:
Esmie Awonteme Abaaluk, Philip Ngare
KEYWORDS:
Digital Loans, Financial Well-Being, Financial Recovery, Logistic Regression, Credit Risk, Financial Inclusion, Kenya, FinAccess
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.15 No.3,
September
22,
2026
ABSTRACT: This study examines the relationship between digital loan use and household financial well-being in Kenya using nationally representative data from the 2021 FinAccess Household Survey covering 22,025 households across 47 counties. Household-level sampling weights are applied throughout the analysis. Digital loan use is classified as current use, past use, or never use, while financial recovery is measured as whether a household reports having overcome its financial problems. Logistic regression models are estimated to assess this relationship before and after controlling for socioeconomic characteristics and credit history. Descriptively, digital loan users report higher financial recovery than non-users. However, this association becomes statistically insignificant after adjustment for educational attainment, employment type, income, and credit history, suggesting that the observed difference is substantially associated with borrowers’ socioeconomic circumstances. Education, formal employment, and income are positively associated with financial recovery, whereas negative Credit Reference Bureau listing is associated with lower recovery. Interaction analysis further indicates that the relationship between digital loan use and financial recovery varies across income groups, with the apparent benefits of digital credit attenuated among middle-income households. Overall, the findings suggest that expanding digital credit access alone may be insufficient to improve household financial resilience. Strengthening education, employment stability, income security, and credit rehabilitation may be more important for sustainable financial recovery. The study contributes nationally representative evidence on digital credit, financial inclusion, and household financial well-being in Kenya and offers implications for responsible digital lending regulation.