Nairobi, Kenya, 20 August 2026…Kenya’s banking industry disbursed Sh326.5 billion in credit to Micro, Small and Medium Enterprises (MSMEs) in 2025, more than double its annual KSh150 billion commitment, underscoring the sector’s growing role in financing enterprise and economic growth, according to the Kenya Bankers Association (KBA) State of the Banking Industry Report 2026 released today.
MSME lending continued to gain momentum in 2026, with banks disbursing Sh100.9 billion in the first quarter, while the outstanding MSME credit book stood at KSh596.8 billion as at December 2025, spread across 1.26 million loans and 707,211 borrowers.
The report shows that 73.4% of outstanding MSME credit was uncollateralised, reflecting the growing role of cash flows and credit history in lending decisions. However, inadequate collateral, poor credit scores and repayment challenges remain key barriers to access. Women-led enterprises accounted for 46% of unique MSME borrowers but hold 25% of outstanding credit, highlighting a persistent financing gap.
The report also points to a stronger and more resilient banking sector. Total industry assets grew 10.3% to KSh8.35 trillion, supported by a 9.9% increase in customer deposits to KSh6.38 trillion. Profit before tax rose 17.6% to KSh306 billion, while the non-performing loan ratio improved from 16.0% to 14.7%. Core capital remained strong at 18.1%, well above the 10.5% regulatory minimum.
The report also notes that banks increased their allocation to government securities, whose share of total assets rose to 29.9% from 27.8%, while the loan-to-deposit ratio declined to 68.1% from 70.1%, indicating a strong conversion rate from deposits to loans.
“Expanding sustainable access to finance for MSMEs remains one of the most important opportunities for accelerating inclusive growth. This will require continued innovation in credit risk assessment, greater use of digital financial services, stronger credit information systems and improved risk-sharing mechanisms,” said KBA Chief Executive Officer, Raimond Molenje.
The report notes that banks are also strengthening their capacity to manage emerging risks, including through implementation of the Central Bank of Kenya’s Climate-Related Risk Disclosure Framework and integration of the Kenya Green Finance Taxonomy.
The industry outlook remains positive, with economic growth expected to strengthen in 2026 as inflation eases and financial conditions improve, although geopolitical uncertainty, elevated global interest rates, fiscal pressures and climate-related risks remain key concerns.
To read the full report, kindly click here.
Christine Onyango
Director, Communication and Public Affairs
Kenya Bankers Association
Email: conyango@kba.co.ke
About Kenya Bankers Association
The Kenya Bankers Association (KBA) is the umbrella body for all commercial banks in Kenya and is regulated by the Central Bank of Kenya (CBK). Established on 16th July 1962, KBA represents 46 member institutions with combined assets exceeding KES 7.7 trillion. Its core mandate is to promote a stable, competitive, and inclusive banking industry by influencing legislation, regulation, and policy to enhance access to affordable credit for individuals, households, and businesses. KBA also drives financial sector development through strategic initiatives, including the launch of Pesalink, the industry’s first peer-to-peer digital payments platform. In partnership with the CBK and other stakeholders, KBA has spearheaded projects such as the modernization of the National Payments System, implementation of the Real Time Gross Settlement System (RTGS), and the Kenya Credit Information Sharing Initiative. Guided by its brand statement, “One Industry. Transforming Kenya,” KBA continues to strengthen the banking sector, foster innovation, drive financial inclusion, and support national economic growth. Learn more: www.kba.co.ke
