Kenya’s credit cycle strengthened in late 2025 as bank lending improved and risk indicators eased after two years of pressure.
- •Private sector credit rose to a record KSh 4.15T in November, up 6.3 percent YoY from about KSh 3.90T a year earlier.
- •The recovery follows a 2.9% contraction in January, marking a clear shift in credit conditions.
- •The outlook for 2026 will depend on stable inflation, continued liquidity strength and the full rollout of the revised risk-based pricing model in March.
The Central Bank has cut the policy rate nine times since June 2024, bringing the Central Bank Rate to 9 percent and average lending rates fell to 14.9 percent in November from 17.2 percent last year. Lower funding costs lifted loan demand in manufacturing, construction and trade, which dominate working-capital and asset-finance borrowing.
Banks entered the second half of 2025 with improved liquidity. The Credit Officer Survey for the third quarter showed 86 percent of lenders reporting stronger liquidity positions. Twenty-nine percent planned to direct additional liquidity to private-sector lending. Interbank activity increased, reflecting better confidence across the system. Credit standards remained unchanged in all sectors, signalling no tightening as loan appetite returned.
Gross loans to the private sector rose from KSh 4.147T in June to KSh 4.257T in September. Deposits increased by 1.8% in the same period, lifting lending capacity while total assets reached KSh 8.06T.
Asset quality improved through the second half of the year. The gross NPL ratio fell to 16.5 percent in November, down from 17.6 percent in June and 17.4 percent in March. Banks intensified recoveries in personal loans, construction, real estate, transport and trade. Lower interest rates and more stable borrower cashflows supported repayment performance.
The data indicates that the credit cycle has moved from contraction to expansion. The recovery follows a difficult 2024 marked by high rates, tight liquidity and persistent NPL pressure.
