The two rims of papers cost him 900 Kenyan shillings (8.8 U.S. dollars) but he had only 7.5 dollars, after having bought some airtime that reduced his mobile money balance.

But he did not panic, he reached his phone and took an overdraft loan of 5 dollars using a new service named Fuliza by telecommunication firm Safaricom, and completed the transaction.

"It was the first time I was using the service and I was really amazed since I always avoid digital credit whenever I can because of the high fees," said Mundia on Thursday.

Unlike the other lending apps which one must enroll to borrow cash, with the new service launched by Safaricom two weeks ago in partnership with the Commercial Bank of Africa, one only needs to be a mobile money user to access the service.

Fuliza is the latest entrant in Kenya’s fast-growing digital credit sector as competition stiffens in the nascent industry and players innovate to stand out.

It targets small businesses, people paying for goods and those sending cash, therefore, promises to be a game-changer as the firm seeks to reach its nearly 25 million mobile money M-Pesa users.

As Safaricom goes for all its M-Pesa subscribers and seeks to boost small and medium-sized enterprises through the overdraft loans, other innovative products in the sector include a Shariah-compliant lender, a lending app targeting farmers only and one to help insurance subscribers pay their premiums on time.

The innovativeness is making the various lenders stand out in the crowded field that had about 50 service providers by the end of 2018.

Besides the telecommunications firms, other players in the industry include banks and independent service providers.

Steve Wafula, an analyst with Soko Investment, noted that the vibrant digital credit sector is set to give banks a run for their money.

"With multiple transactions daily, my bank cannot give me even a one-dollar overdraft but I can now get up to 500 dollars through digital credit.

"No collateral, no paperwork, Kenyan banks are facing serious competition here," he said.

He observed that mobile loan service providers have studied the gaps in the banking sector and are filling them.

"In the case of Safaricom, M-Pesa has officially become a digital bank, giving loans of up to 500 dollars without paperwork and collateral.

"This is a revolutionary aspect in the need to access loans by the informal sector," he added.

Interest rate on digital credit is between 10 percent and 15 percent per transaction, unlike banks’ 13 percent per year, but it is clear that this is not a hindrance to borrowers who for years had starved for loans.

But even as the digital lenders take the fight to banks, Kenyan banks are not sitting pretty.

They are also emerging as one of the biggest beneficiaries of the technology.

The financial institutions have not only widened their loan portfolios but also their customer base through the technology, reaching low-income earners like motorbike taxi operator David Kiarie, who would ordinarily not walk into a bank and take a loan.

Kiarie, who is based in the east of Nairobi, recently borrowed from two banks through their digital credit platforms to start a grocery shop for his wife, which is slowly picking up.

"I borrowed from my bank and another, some 40 dollars and gave the money to my wife," he said, adding he has since repaid the loan from his bank thanks to the weekly deposits made in his savings account.