Kenya’s lending environment gathered fresh momentum towards the end of 2025, with banks extending more credit as liquidity improved and risk pressures began to ease after a prolonged squeeze.
Private sector loans rose to a new high of KSh 4.15 trillion in November, representing a 6.3% year-on-year increase from roughly KSh 3.9 trillion a year earlier. This marked a sharp turnaround from January, when credit growth was still contracting by 2.9%, signalling a decisive shift in lending conditions.
The rebound has been underpinned by aggressive monetary easing. Since June 2024, the Central Bank has lowered its policy rate nine times, bringing the Central Bank Rate down to 9%. Average commercial lending rates followed suit, falling to 14.9% in November from 17.2% a year earlier. Cheaper credit revived borrowing across manufacturing, construction and trade, sectors that account for most working capital and asset financing.
Banks also entered the second half of the year with healthier liquidity positions. The third-quarter Credit Officer Survey showed 86% of lenders reporting stronger liquidity, with nearly a third planning to channel additional funds into private sector lending. Interbank market activity picked up, pointing to improved confidence across the system. Importantly, credit standards remained unchanged across sectors, suggesting banks were not tightening terms even as demand returned.
Also Read: Safaricom’s Debut Green Bond Draws Massive Demand, Hits KSh 41.4bn in Bids
Loan books continued to expand through the year, with gross private sector credit rising from KSh 4.147 trillion in June to KSh 4.257 trillion by September. Customer deposits grew by 1.8% over the same period, supporting lending capacity, while total banking sector assets climbed to KSh 8.06 trillion.
Asset quality showed steady improvement. The non-performing loan ratio declined to 16.5% in November, down from 17.6% in June and 17.4% in March, as banks stepped up recoveries in personal lending, construction, real estate, transport and trade. Lower interest rates and more stable borrower cash flows helped strengthen repayment behaviour.
Overall, the data suggests Kenya’s credit cycle has shifted from contraction into expansion, following a difficult 2024 characterised by high borrowing costs, tight liquidity and elevated loan defaults. The trajectory into 2026 will hinge on sustained inflation stability, solid liquidity conditions and the full implementation of the revised risk-based credit pricing framework scheduled for March.
