Kenyan banks expand MSME loan book by 30% to Ksh 424B

Kenyan commercial banks have significantly expanded their lending to Micro, Small and Medium Enterprises (MSMEs) by 30% over the past nine months, reaching a total of Ksh 424.7 billion. This growth comes as the cost of borrowing has decreased. According to the Kenya Bankers Association (KBA), MSME lending increased from Ksh 326.5 billion in the same period last year.

Equity Bank led the way in MSME lending, disbursement totaling Ksh 128 billion, which is equivalent to 30.1% of the total loans. The bank's disbursements were more than double those of its closest competitor, Co-operative Bank, and more than three times the volume provided by third-ranked KCB. Equity Bank's capital provided to small enterprises far exceeded the combined lending of the second and third-ranked lenders.

The KBA attributes the sustained credit growth to a more favorable macroeconomic climate, characterized by a softer borrowing cost environment and increased demand for private enterprise. During the period reviewed, commercial bank lending rates decreased to 14.4% in September 2026, down from 17.2% in November 2024.

The KBA also reported improvements in loan repayment during this period, with the gross non-performing loan ratio contracting to 13.9% from 14.8% in June 2026 and 17.6% in August 2025. This reduction in bad loans is attributed to sound credit risk appraisal practices across the industry and healthier cash flows among operating businesses, as supply chain bottlenecks and inflationary pressures have eased.