How much credit can a small shop safely give out?

A practical ceiling is 10 to 15 percent of monthly revenue in total outstanding credit at any moment. A shop turning over KES 1 million a month should therefore carry no more than KES 100,000 to 150,000 on the book. Above that, a single run of defaults stops the next restock rather than just reducing the month's profit.

Why do credit sales close shops that look profitable?

Because profit on paper is not cash in the till. Goods leave the shelf, the margin is recorded, but the money arrives weeks later or never. The shop then borrows to restock, pays interest on stock it has already sold, and the gap widens every month. Kenyan trade reporting puts credit sales among the leading causes of micro-retail collapse.

What should a credit record contain to be useful?

Five fields, captured at the moment of sale: the customer, the amount, the date, the due date and what was bought. A name and a number in an exercise book is not enough to chase payment or to show a lender. Recording it in the POS at the point of sale also removes the end-of-day reconstruction, which is where most entries get lost.

Can a credit book help a shop get financing?

Yes, if it is digital and consistent. Fewer than 20 percent of Kenya's 7.4 million MSMEs can access formal credit, according to the 2025 KNBS survey, largely because they cannot produce a sales and repayment history. A twelve-month record of customer accounts and collections is one of the few documents an informal shop can build on its own.

When should a shop stop selling on credit to a customer?

When the account passes its due date without a payment, when the balance reaches the limit set for that customer, or when the customer asks for a second credit while the first is open. Any of the three is enough. Enforcing it at the till, rather than in a conversation, is what keeps the decision from depending on who is serving.

Selling on credit: the controls that keep a shop solvent

In a lot of shops the exercise book under the counter holds more money than the till does. The owner knows roughly what is in there. Nobody knows exactly.

Kenyan trade reporting has been blunt about where that ends: credit purchases are among the leading reasons micro-retail businesses collapse, with low digitisation and poor ledger keeping leaving shops unable to raise the funding that would have carried them through (The Star). The sales were real. The cash never arrived.

How much credit a shop can actually carry

Total outstanding credit should stay inside 10 to 15 percent of monthly revenue, a rule of thumb used by Kenyan retail operators as the line between a service and a liability (DukaSale). Past that point the book stops being a convenience for regulars and starts funding your customers’ household budgets out of your working capital.

What a default actually costs is worth doing on paper once. The last column assumes a 12 percent gross margin, which is where fast moving groceries tend to sit; replace it with your own.

Monthly revenue	Safe outstanding credit (15%)	Loss if a fifth is never repaid	Extra sales needed to earn that back
KES 300,000	KES 45,000	KES 9,000	KES 75,000
KES 1,000,000	KES 150,000	KES 30,000	KES 250,000
KES 3,000,000	KES 450,000	KES 90,000	KES 750,000

A shop doing a million a month has to sell a quarter of a million extra to recover one bad month of credit. That is the number to keep in mind the next time a familiar customer asks you to write it down.

The book is the problem, not the credit

Credit itself is a reasonable commercial tool. Giving it without a record is what sinks shops, and the scale of the record keeping gap is well documented.

Kenya has about 7.4 million MSMEs, contributing close to 40 percent of GDP and employing more than 15 million people, yet fewer than 20 percent can access formal credit, according to the 2025 MSME survey from the Kenya National Bureau of Statistics. Most of them are unlicensed, and wholesale and retail trade makes up 62.9 percent of those unlicensed businesses. In Nigeria, roughly 90 percent of the retail sector is informal (Business Fights Poverty), and the World Bank reported in 2025 that fewer than one in twenty Nigerian MSMEs had access to bank credit (BusinessDay).

Late payment is not a rare event either. More than 68 percent of Nigerian small businesses report problems with late payment, usually traced back to no credit assessment at all before the goods went out (ICA Nigeria).

The pattern repeats: the shop carries the risk, holds no evidence, and so cannot pass any of that risk to a lender. Banks are not generous about it. Kenyan banks and microfinance institutions wrote off KES 8.8 billion of MSME loans in one year, with MSME non-performing loans reaching KES 149.8 billion, over 21 percent of all bad loans in the banking sector (TechTrends).

Five rules that make a credit book survivable

None of these need software. All of them get easier with it.

One limit per customer, set before they ask. A number you decided calmly is a number you can hold to at the counter. Write it next to the name.

A due date on every entry. Not “when I get paid”. A date. An entry without one cannot be chased, and cannot age out of your list.

No second credit while the first is open. This single rule removes most of the losses, because the customers who default almost always stack first.

Recorded by the person handing over the goods, at that moment. End-of-day reconstruction is where entries disappear, and it is also where a dishonest employee hides a sale as a credit.

A twenty-minute review every week. Sort by oldest, call the top five, mark what was said. A list nobody reads is a list of gifts.

Credit against the other ways to fund your stock

Shop credit looks free because no interest is charged on it. It is the most expensive working capital on this table, because you take the full loss on default and carry the restocking gap.

Source of working capital	What it costs you	Who carries the default	What breaks first
Credit written in your own book	Nothing visible, the full value on default	You, completely	Restocking
Supplier credit	Sometimes an early-payment discount given up	Shared with the supplier	The supplier relationship
Bank loan	Interest plus collateral, and fewer than 20% of Kenyan MSMEs qualify	You	Approval time
Licensed digital credit	Interest and fees, available in days	You	Repeat borrowing

Digital lenders have become the default fallback, which is not the same as a good one. By November 2025, licensed digital credit providers in Kenya had granted 6.6 million loans worth KSh 109.8 billion, against 5.5 million loans and KSh 76.8 billion five months earlier (Central Bank of Kenya), and the licensed market has since passed 250 providers (Ecofin Agency). A shop that lends to its customers for free and then borrows at those rates to restock pays twice for the same goods.

What your POS has to do about it

Four capabilities turn a credit book from a liability into an asset. A customer account attached to the sale, so a credit is a transaction and not a note. A limit enforced at the till, so the rule survives whoever is serving. An aging report, which is the only view that tells you how bad the book has become. And offline operation, because a shop that cannot record a credit when the connection drops will record it on paper, and paper does not sync.

Mobile money closes the loop. Ghana alone processed more than 270 billion dollars in mobile money in the first ten months of 2025, so a repayment usually arrives as a MoMo or M-Pesa message rather than cash. Matching that message to the customer account is the step most shops do by hand; our M-Pesa merchant guide sets out the reconciliation routine, and the controls in our piece on till fraud and stock loss cover the employee side of the same problem.

digabloPos records customer accounts, payment methods and stock movements on the device and syncs when the network returns, at no licence cost. If you are weighing systems, our POS comparison shows which ones support per-customer accounts and limits rather than a free-text note field.

The three signals to stop

Stop extending credit when outstanding balances pass 15 percent of monthly revenue, when more than a quarter of the book is past its due date, or when you cannot say the total from memory within 10 percent.

Each one means the same thing: the book is now running the shop. Tell us what your numbers look like and we will show you what the aging report would have told you six months ago.