Kenya has witnessed a surge in the number of mobile digital lenders that compete with traditional bricks & mortar banks to provide customers, specifically SMEs, with access to credit.

Jules Ngankam, the deputy CEO and CFO at African Guarantee Fund, said there is a US$155 billion funding gap for the SMEs in Africa.

"This makes every credit avenue an attractive proposal," said Ngankam

To date digital lenders, such as Branch, Tala and Okash, have attracted a number of users over a short period of time. Google PlayStore ranks Tala and Branch as the country's top two finance apps.

"The issue they are trying to solve is always the gap in supply and demand. Business need to have access to cash. At the same time there are people who have enough cash to invest," Ngankam added. "Traditionally, you have money to give to the bank and then they lend it out for profit. What they [digital lenders] are doing is exactly the same."

He said that the number of digital lenders is growing at a rapid rate due to low cost of operations as compared to traditional banks. Technology has enabled digital lenders to curb costs such as hiring a workforce or having physical branches.

According to Ngankam running a banking system can be expensive and in turn banks might not want to lend small amounts of money. The growing interest on digital lenders suggests that there is enough demand for credit from growing businesses, he said.

However, mainstream financial operators have launched their own digital lending solutions to remain on par with the digital financial services growth curve.

According to Equity Bank's half-year results ending 30 June 2018, 78% of transactions and 97% of loans were processed via the company's mobile platform.

In response, Central Bank of Kenya (CBK) governor Patrick Njoroge has vowed to regulate the space, specifically the interest charged by digital lenders.