Until recently, Kenyan supermom Elizabeth Otieno was like most Africans - she didn't have a credit card. In fact, the dangers of debt intimidated her.
But now she loves the freedom of buying gas, groceries, and more with her card. "I feel so independent," she says. "And I love not having to borrow from my family anymore."
Across Africa, cash has long been king. Want to buy a car? You'd better save enough to pay for the whole thing up front - or get a loan from relatives or friends.
But now there's a credit boom. In the next year, for instance, 500,000 new credit cards may be issued in Kenya, a dramatic jump from the current 100,000 cards in this nation of 31 million people.
Credit will help African economies grow faster, economists say. It may also curb corruption by reducing use of untraceable cash. And, for better or worse, it's tilting people like Ms. Otieno away from traditional African reliance on family and community - toward Western-style individualism. "It gives you a confidence that you can make it on your own," she says, adding with a smile, "even if you're broke."
Africa's credit boom is driven by the global spread of a small, but crucial, piece of economic infrastructure - the credit bureau. These agencies compile individual financial histories and provide the dossiers to lenders when a person applies for loans or credit cards. The data enable banks to judge accurately whether a person is too great a credit risk.
The earliest credit bureaus sprang up in the US in the 1830s, but they started spreading to developing nations only recently, in part because the World Bank now encourages their adoption.
"We have found a clear relationship between development of financial systems" - including credit bureaus - "and economic growth," says Margaret Miller, a World Bank economist. They also help cut down on corruption by introducing new levels of transparency into the system - and by cutting down on cash-only transactions.
And now they're coming to Africa. "This will be the year of credit-bureau commencement in Africa," says Stephen Mills, head of CRB Africa, one of the fastest-growing credit firms on the continent.
Credit bureaus - followed by credit cards - are springing up in Uganda, Rwanda, Nigeria, Zimbabwe, Mozambique, and elsewhere.
To be sure, credit cards can be abused, and their proliferation may lead some Africans to get buried in debt. The threat of credit-card fraud is another danger. For now, perpetrators are only fined the cost of the card's plastic, according to Kenya's credit card association.
But credit cards help solve two key economic challenges, Mr. Mills says. First, "a fundamental problem in Africa is the migration of debtors" - a person getting a loan at Bank A, defaulting on it, and then going to Bank B for another loan. Until now, Bank B hasn't had any way to know this person is a huge credit risk. So banks have typically given credit cards only to a select few.
Already this has begun to change. Last quarter, for instance, the Kenya division of London-based Barclays Bank had six people voluntarily walk in and repay debts. The reason: They had been blacklisted and could not get credit elsewhere until they had settled with Barclays.
The second issue: "The biggest problem for businesses in Africa isn't profit and loss - it's cash flow," says Mills. Without credit, consumers must save up - often for a long time - before making big purchases. Retailers just have to wait while the consumer saves.
This creates "a logjam, and the only way to clear it up is to introduce credit bureaus," says Mills. Now banks and retailers can start extending credit to many more people, enabling consumers to buy now and pay later. This creates a risk of bankruptcies and great indebtedness. But it also "represents a way to democratize access to credit" - enabling more people to jump-start their economic future, says Ms. Miller of the World Bank.
Indeed, in Kenya last year, Barclays doubled the number of credit cards it had issued. Also, last year just seven Kenyan banks were issuing credit cards. Now 16 are. One reason: They're big money makers. Interest rates on Kenyan cards are between 36 percent to 50 percent per year. (US cards typically have 18 percent to 22 percent annual rates.)
High interest rates were one reason Otieno used to reject credit cards. Also, years ago, her husband had a card. Like many rookie cardholders, he treated it as a source of income and wasn't disciplined about paying off his balance. He got into financial trouble. So did many others in Kenya. In fact, credit cards got a reputation for bringing financial ruin to their owners. One local bank now acknowledges Kenyans' "card-o-phobia" in its ads - and aims to help them get over it.
For Otieno, when a friend who works at a bank began praising them, she thought she'd give one a try. Now she sees great advantages. For one, in a city nicknamed "Nairobbery" because of street crime, "It's not safe to carry cash," she says. Also, her credit-card statement gives her a clear record of how she's spent her money - unlike cash, which just slips through her fingers. "It helps me budget," she says.
Since most Kenyans get paid once a month, credit cards help with month-end emergencies. When her two children got into a top-notch school recently, she suddenly had to buy new books, clothes, and shoes. "I hadn't planned for it," she says, so she used her credit card. "I was so glad I didn't have to borrow from my family," she says.
In fact, her credit card symbolizes a new lifestyle - one that involves working 12- or 14-hour days at a cellphone company and hanging out with upwardly mobile friends more than family. She says her family complains, "You're so independent, and we don't see you anymore."
She also sees how credit cards might lead to the end of two support groups she belongs to. They're called kiamas - and are part of the communalism that dominates many African cultures. Every month, each member puts $15 into a collective pot. Then, on a rotating basis, one member gets the whole amount and uses it to improve their lives. Otieno has bought carpets, cutlery, and other household items. But someday she might not need the kiama anymore.
"The kiama thing is about relying on each other," she says, "but credit cards make you so independent."