According to information and insights company TransUnion’s latest Consumer Pulse Survey, Zambian households are facing significant financial challenges like small business closures, job losses and rising inflation.

According to the study, 33% of households reported an increase in income (a five percentage-point drop from Q2 2023) and 29% reported a drop in their income over the past three months. Despite this, 79% of consumers expect their incomes to improve over the next 12 months, although this was three percentage points lower than a year ago. 

“While consumers are cautiously optimistic about their future incomes, elevated inflation and tight lending conditions will continue to weigh on household consumption in 2024,” says Mildred Stephenson, CEO TransUnion Zambia.

Consumer responses to economic strain

With inflation having risen to 13.8% in April 2024, the number of consumers who expect to be able to pay all of their current bills and loans in full dropped to 65% (down two percentage points from the same time last year). This financial pressure may have led many to consider paying their current bills and loans by taking on temporary work (47%), making partial payments (39%) or borrowing from friends and family (29%).

Possibly in response to rising interest rates, 30% of respondents said they paid down their debt faster in the last three months – down seven percentage points from a year ago. This could be a result of disposable incomes having taken a knock with bank lending rates increasing to 28% in May 2024 (their highest level since 2020). In May, the Bank of Zambia also raised its policy rate by 100 basis points to 13.5% to address persistently high inflation – with no anticipated monetary easing until 2025.

Spending also appears to have been affected by the increasing rates. Over the past three months, 61% of consumers reported reducing their discretionary spending (dining out, travel, entertainment) and half of the surveyed households (50%) said they had cancelled or reduced digital services (a 10 percentage-point increase from Q2 2023). 

Almost one in four households (26%) reports boosting their contributions to emergency funds, but a concerning trend was the rise in consumers reporting reduced retirement savings at 18% (versus 11% last year).

Looking ahead, consumers plan to pay more on bills and loans (47%) and medical services (45%), and boost retirement funds and investing (40%) in the next three months.

Credit access and demand

While 96% of Zambian respondents consider access to credit important for achieving their financial goals, only 32% feel that they have adequate access – a slight improvement from 30% last year. 

In Q2 2024, the demand for credit surged with 48% of consumers planning to seek new or refinance existing credit in the next year, a notable 10 percentage-point increase from a year ago. Millennials (27–42 years old) and Gen X (43–58 years old) showed the highest demand at 54% each. Among those planning to apply for new or refinance existing credit within the next year, 53% said they’ll apply for a new personal loan in the next year, a significant 12 percentage-point jump from last year. Millennials (57%) and Gen X (64%) showed the most appetite for new personal loans. 

However, 47% of potential borrowers reported abandoning their plans to take out new credit, with 38% citing the high cost of credit as the top reason for this decision.

Monitoring credit reports

Monitoring their credit status is viewed as extremely, very or moderately important by 90% of consumers, yet just below half (49%) say they review their credit reports monthly, and 27% don’t monitor them at all. A growing number of consumers (49%, up from 47% last year) believe that incorporating alternative data, such as rental payments and gym memberships would improve their credit scores. 

Fraud concerns

Ecommerce is on an upward trend with 34% (compared to 28% last year) of respondents saying they conduct over half their transactions online. However, fraud poses a significant concern, with 75% reporting that they were targeted online, email, phone call or text messaging fraud in the past three months but avoided falling victim. 

Among those who said they were targeted, money and gift card scams were the most common reported methods, at 50%, (up from 46% last year) followed by smishing (43%), and phishing and vishing (both at 36%). Consumer concern regarding sharing personal information remains notably high, at 95%. The main concerns included invasion of privacy (79%), fear of identity theft (77%) and receiving unsolicited marketing communications (40%).

“These findings highlight the importance of robust data protection measures and privacy policies. At the same time, consumers should check their credit reports regularly to flag any possible fraud that affects their credit scores, as early as possible,” says Stephenson. 

Consumers can find out more about their credit report from TransUnion here.