Nairobi — Kenya’s private sector lending rebounded sharply in late 2025, with credit extended by commercial banks climbing to KSh 4.15 trillion in November, marking a 6.3 percent year-on-year increase and underscoring renewed confidence in the country’s economic outlook after a challenging period of tight credit and high borrowing costs.
The uptick in lending represents a decisive shift in Kenya’s credit cycle. After contracting earlier in the year, private sector credit expansion has regained momentum as liquidity conditions improve, non-performing loans ease, and borrowing costs fall. The November data reflect not only stronger bank-customer engagement but also greater activity across key economic sectors.
Turning the Tide on Credit Contraction
At KSh 4.15 trillion, private sector credit now stands significantly higher than the approximately KSh 3.90 trillion recorded in the same month last year. This recovery follows a contraction of nearly 2.9 percent in January, when many businesses held back on borrowing amid tight liquidity and elevated interest rates.
Economic analysts link the credit rebound to a series of monetary policy adjustments by the Central Bank of Kenya (CBK) in 2024 and 2025. Policymakers have repeatedly lowered the benchmark interest rate, reducing the Central Bank Rate to 9 percent and prompting average lending rates to fall to about 14.9 percent in November from around 17.2 percent a year earlier. These rate cuts have helped reduce the cost of funds for consumers and businesses alike and improved loan affordability.
The improved credit environment has encouraged borrowing in sectors that drive Kenya’s growth, including manufacturing, construction, and trade, which together account for a significant share of working-capital and asset-finance activity.
Banking Sector Liquidity and Credit Standards
Liquidity in Kenya’s banking system strengthened markedly through 2025. In a third-quarter credit officer survey, 86 percent of lenders reported improved liquidity positions, and nearly a third indicated plans to allocate additional funding to private-sector loans. Interbank trading activity also rose, reflecting higher confidence among financial institutions.
Importantly, banks have maintained steady credit standards across sectors, signalling that the recent lending growth is not being driven by relaxed risk thresholds but by genuine demand and enhanced lending capacity.
Non-Performing Loans Down, Healthier Balance Sheets
Asset quality within the banking sector showed signs of improvement. The gross non-performing loan (NPL) ratio fell to 16.5 percent in November, down from 17.6 percent in June, as borrowers in personal loans, construction, transport, and trade demonstrated better repayment performance. Lower interest rates have supported borrower cash flows, aiding this improvement.
Rising deposits also contributed to stronger lending capacity, with total assets under management at commercial banks expanding, reinforcing the sector’s ability to meet credit demand.
Implications for Growth and Investment
The resurgence in credit growth aligns with broader indicators of private sector vibrancy in Kenya. Independent economic surveys, including PMI data, show that business activity has recorded multi-year highs, indicating expanding economic output and demand.
While the outlook for 2026 will depend on stable inflation, continued liquidity conditions, and the full implementation of risk-based pricing models in the banking sector, the November private sector credit figures signal a marked rebound from early-year stagnation. Stronger credit flows can support investment decisions, expand capacity across sectors, and foster job creation, particularly in manufacturing, construction, and trade.
Balancing Risks and Opportunities
Despite the positive trends, analysts caution that sustained growth in private sector lending will hinge on prudent risk management and macroeconomic stability. Continued monitoring of asset quality, inflation, and external shocks will be crucial as Kenya navigates the recovery phase.
For now, the expansion of private sector credit to KSh 4.15 trillion represents a tangible vote of confidence from both lenders and borrowers, reinforcing Kenya’s status as one of East Africa’s most dynamic economies and a bellwether for broader regional growth.
