The Next Wave: Kenyan banks have forgotten how to lose money

Lending is a enterprise constructed on the danger that somebody won’t pay again. A borrower defaults, a harvest fails, or a foreign money loses worth. Yet Kenya’s largest business banks appear insulated from the financial situations their debtors face. Their income continue to grow whilst households and companies come underneath strain.

I spent the final two days going by way of 5 years of audited experiences from Kenya’s largest lenders, searching for a foul yr. I couldn’t discover one. Not a single tier-1 financial institution recorded an annual web loss over the interval. Combined pre-tax income rose 18.6% in 2023 to KES 260.09 billion ($2 billion) in 2024, earlier than rising one other 17.6% to KES 305.95 billion ($2.36 billion) in 2025.

NCBA Group, for instance, gives a glimpse of how worthwhile the interval has been. Its revenue after tax grew 409% from 2020 to KES 23.4 billion ($180.1 million) in 2025. Dividend payouts additionally rose 368% to KES 11.7 billion ($90.1 million).

But document income don’t essentially imply banks have stopped lending. There are causes banks are cautious. A enterprise with irregular gross sales, incomplete accounts and no property to provide as collateral is tougher to assess than a authorities bond. Recovering a foul mortgage can even take years, with authorized and administrative prices consuming into no matter a financial institution would possibly get better.

A 2026 Kenya Bankers Association working paper, utilizing information from the 2018 World Bank Enterprise Survey, gives an attention-grabbing perspective. Roughly three-quarters of small companies which may want financing by no means apply for financial institution loans. They anticipate rejection, can not meet collateral necessities, or discover borrowing too costly. Of those that apply, greater than 90% are accredited.

The downside, then, is that any potential debtors by no means make it by way of the door.

Banks additionally have to account for rising bad-loan prices. The trade’s non-performing mortgage ratio reached 16.4% in December 2024, in accordance to the Kenya Bankers Association. As compensation turns into much less predictable, lenders have cause to tighten credit score assessments.

Government securities provide an alternative choice; by late 2024, they accounted for 27.8% of banking sector property, whereas the loan-to-deposit ratio had fallen to 70.1%. Lending to the state offers banks another to assessing 1000’s of companies with completely different money flows, credit score histories and compensation dangers.

While huge lenders backed away from underwriting native companies, they noticed a gap in shopper funds by partnering with cell telecom networks.

Safaricom runs Fuliza, its overdraft facility, alongside NCBA and KCB (Sidian Bank is becoming a member of this profitable product). At its investor briefing in Nairobi on Thursday, Safaricom stated Fuliza introduced in KES 4.9 billion ($38 million) in income within the six months to September 2026, up 86% yr on yr. The overdraft accounts for 71% of Safaricom’s KES 7.0 billion ($54.3 million) credit score portfolio income.

Over these six months, Fuliza disbursed KES 1.16 trillion ($8.97 billion)—up 84%—and picked up KES 1.15 trillion ($8.94 billion), attaining a 99.6% restoration fee by way of automated pockets deductions. Its buyer base grew 88.9% to 17.2 million debtors.

Yet the typical advance fell 24.6% to KES 192 ($1.49), down from KES 254.60 ($1.97).

Fuliza works in a different way from a traditional financial institution mortgage as a result of it’s tied to M-PESA transactions, entails automated deductions, and handles 1000’s of small advances by way of an current funds community, giving its lending companions a manner to assess and get better credit score at a scale that might be tough to replicate by way of conventional mortgage purposes..

For bigger sums, shoppers flip to digital credit score suppliers (DCPs). In the six months to June 2026, DCPs lent out KES 43.7 billion ($336.4 million), pushing their complete excellent mortgage e book to KES 153.8 billion ($1.18 billion), a 39.6% soar from December 2025.

Kenya now has 281 licenced digital lenders serving 8.9 million clients, with common loans at KES 17,280 ($133.02) on one-week to two-month phrases. According to the Central Bank of Kenya (CBK), 45% of customers borrow to inventory outlets, 37% pay college charges, and 23% buy meals. These amenities cost day by day charges round 0.6%, or roughly 24% every month. FinAccess survey experiences that 16.6% of Kenyan households face debt misery, up from 10.3% in 2021.

Kenyan banks have not stopped lending to companies. In 2025, they disbursed KES 326.5 billion ($2.5 billion) to micro, small, and medium enterprises (MSMEs), with greater than 73% of excellent loans issued with out collateral. Access stays uneven, although: women-led companies made up 46% of MSME debtors however acquired simply 25% of excellent credit score, in accordance to the Kenya Bankers Association.

Banks have good cause to fear about defaults, however companies with out formal accounts, predictable money flows or property to pledge usually battle to qualify. Lenders should discover methods to assess these companies with out exposing themselves to losses they can not take up.

Kenn Abuya

Senior Reporter, TechCabal

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