Salary Advance Loans in Kenya - Requirements, Limits & 7 Top Providers

March 16th, 2023 by Felix Cheruiyot


Salary advance loans help cover unexpected expenses in between pay cheques. Learn how to qualify and where to get salary advance loans in Kenya.

Millions of workers worldwide live from pay cheque to pay cheque, with barely any savings for unforeseen emergencies. Workers have to scramble for short-term loans when a financial crisis hits, as they often do.

With the informal short-term loan market full of unscrupulous players that prey on desperate borrowers and charge exorbitantly high interest rates, it’s refreshing to see the Kenyan government responding with strong regulation.

The sanity brought by tighter regulation by the government through the Central Bank of Kenya and the growing demand for short-term credit has encouraged the emergence of new providers of salary advance loans.

This article will look at the impact of salary advance loans in Kenya. We will also discuss the approval criteria and where you can access salary advance loans in Kenya.

Let’s dive right in.

What is a salary advance loan?

A salary advance loan is an emergency, short-term loan advanced to a salaried person by a financial institution. Repayable with the borrower’s next salary, a salary advance loan differs from a salary advance, where an employer pays their employee a portion of or all their salary before the scheduled payday.

If you need quick cash for a medical emergency or last-minute bill payment, salary advance loan providers are a great option to consider. These innovative lenders are transforming Kenya's financial landscape by offering short-term loans to individuals based on their expected salary.

Unlike traditional lenders, salary advance loan providers don't require collateral or extensive credit checks, making it easier for borrowers to access funds quickly.

How do you qualify for salary advance loan in Kenya?

To qualify for a salary advance loan, you must be employed and have a bank account. Most salary advance providers also have a minimum salary threshold and usually limit the amount you can borrow based on your basic salary.

Where the salary advance loan provider does not have a minimum salary requirement, how much you can borrow usually depends on your basic salary.

Some providers require salary advance loan applicants to be salaried account holders. Many lenders will require borrowers to receive their salaries through the bank if one is not doing so already. Others, like KCB Bank, add that the account against which you are borrowing be at least 3 months old.

The repayment period for salary advance loans is usually short, ranging from a few weeks to 3 months. Most lenders have loan calculators that determine how much qualifying applicants can borrow, the interest rate you will be offered, and the time within which you can repay the salary advance loan.

Salary advance loan providers are regulated by the Central Bank of Kenya. These regulations are meant to protect borrowers and ensure they are treated fairly and that interest rates are transparent and reasonable.

To operate in Kenya, salary advance loan providers must first obtain a license from the CBK. The licensing process involves meeting specific requirements, including having a minimum level of capital, adequate governance structures, and appropriate risk management systems in place.

Salary advance providers must disclose all the terms and conditions of their loans to borrowers, including interest rates, fees, and repayment terms. This transparency enables borrowers to make informed decisions when taking out loans and ensures that they understand the true cost of borrowing.

In addition, salary advance providers must clearly communicate any changes to the terms and conditions of the loan to the borrower. This includes any increases or decreases in interest rates, fees, or repayment terms. This is important to ensure that borrowers are not taken by surprise when making repayments or paying late fees.

The CBK’s regulations and guidelines for the salary advance loans industry also cover such areas as customer service, loan terms and conditions, customer data protection, and responsible lending. The apex bank also requires salary advance loan providers to implement risk-based credit checks before extending credit.

Importance of salary advance loan providers in Kenya

Salary advance providers are not just beneficial to borrowers; they are also transforming Kenya's economy in other important ways. Here are some ways salary advance providers positively impact the Kenyan economy:

1. Boosts consumer spending

Salary advance providers allow individuals to access funds quickly, which puts more money in their pockets. When individuals have access to funds, they are more likely to spend money on goods and services, stimulating economic growth.

Increased consumer spending encourages businesses to produce more goods and services to meet the demand, leading to more job opportunities and further economic growth. So giving people access to salary advances safely enables them to meet their spending needs timeously, improving their quality of life and spurring economic growth.

2. Encourages entrepreneurship

Salary advance loan providers avail fast capital that can encourage employed people to start income-generating projects. The salary advance loan bridges the funding gap that is often the hurdle that prevents small businesses from getting off the ground.

The capital the short-term loan avails can help entrepreneurs invest in new equipment and buy more stock to meet growing demand, increasing profits.

3. Reduces the need for informal loan lenders

Informal lenders often charge exorbitant interest rates and fees, which can trap borrowers in a cycle of debt. Salary advance providers offer a regulated and transparent alternative to informal lenders, reducing the need for these risky borrowing options.

By reducing the number of individuals who fall victim to predatory lending practices, salary advance loan providers are helping to improve the financial stability of households and communities.

Through their low annual percentage rates, salary advance providers also provide transparency and affordability for individuals who need emergency funds.

Furthermore, formally registered salary advance loan providers often provide flexible repayment plans tailored to the borrowers' needs. They also have more flexible terms and qualifying criteria than traditional loan lenders, providing consumers with a speedy and secure loan process.

4. Creates jobs

By helping fund side hustles by entrepreneurially-minded employed people, salary advance loans are helping create jobs in various sectors of the economy, reducing unemployment.

In addition, the growth of salary advance providers themselves has also led to job creation in the financial sector. As more entrepreneurs, small businesses, and individuals seek out these services, more jobs are created to meet the increased demand.

How long does it take for a salary advance to be processed?

A salary advance loan should be processed within a day, but in Kenya it can take up to 7 days to get the funds, as is the case with the KCB Bank. If it takes more than a week, a person may as well wait for their salary.

Thankfully for borrowers, new salary advance loan providers are pushing hard to reduce the time it takes to apply for a loan. Fin Kenya, for example, promises to process loan applications and disburse funds within 30 minutes.

People who take out salary advance loans typically need the funds in a hurry. The assumption is that the unforeseen problem they want to address cannot wait for their payday.

Borrowers can also assume that the fact they are gainfully employed and are - in many cases - an existing customer of the bank prequalifies them for the salary advance loan.

However, non-traditional lenders are emerging as the preferred option for accessing salary advance loans. That is thanks to their ability to process loans quickly.

Some banks are using mobile communication technology to make the process of applying for a salary advance loan in Kenya faster and more convenient. With KCB Bank, for example, account holders can request a salary advance through their mobile phone by dialling *522#.

Where to get a salary advance loan in Kenya?

There are multiple salary advance loan providers in Kenya. The options continue to grow as more fintechs emerge to serve the ever-expanding market. Below is a list of some of the salary loan providers in Kenya:

  1. KCB Bank
  2. Equity Bank
  3. Family Bank
  4. Fin Africa
  5. Commercial Bank of Africa
  6. Amref Sacco

Future outlook of salary advances in Kenya

Despite some challenges, the future looks bright for Kenya's salary advance loan market. As the industry becomes more established and regulated, it is likely that the cost of borrowing will come down, and the risk of default will be easier to manage.

The increasing use of technology and data analytics will also make it easier for providers to assess risk and offer more personalized loans to borrowers.

Furthermore, with more people gaining access to smartphones and the internet, there is a growing demand for digital financial services. Salary advance providers are well-positioned to meet this demand, and with the right regulatory framework in place, they could play an important role in driving financial inclusion and economic growth in Kenya.

Overall, while there are certainly challenges facing salary advance providers in Kenya, the potential benefits to borrowers and the economy make this an exciting and dynamic industry to watch in the coming years.

Do more with your salary advance loan with IntaSend

Salary advance loans have had a significant impact on the economy of Kenya. They have provided a means for individuals to access credit quickly and efficiently, promoting financial inclusion and empowering borrowers to take control of their finances.

Despite facing some challenges in the regulatory environment, salary advance providers have continued to adapt and improve their services, ensuring that they remain relevant and beneficial to their customers.

As we look towards the future, we can expect more growth and innovation in the salary advance loan sector, which will improve the financial well-being of millions of Kenyans.

As Kenya's leading payments solutions company, IntaSend supports lenders and borrowers. Lenders can use our wallet-as-service product to build and deploy their digital wallet services faster. These will make it easier to disburse loans.

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