Banks expect private sector credit growth to strengthen toward the end of this year, supported by an easing monetary policy that has lowered lending rates and improved borrowing conditions for households and businesses.
Central Bank of Kenya (CBK) Market Perceptions Survey notes that bank respondents observed that interest rates have declined, encouraging uptake of new loans and easing repayments on existing variable-rate facilities.
The survey targeted CEOs and other senior officers of 400 private sector firms comprising commercial banks, microfinance banks and non-bank private firms such as hotels.
Lower borrowing costs are expected to lift disposable incomes, particularly for firms and households servicing debt, with the knock-on effect of supporting overall economic demand.
The survey notes that improvement in credit growth expectations is also anchored in stable macroeconomic conditions observed in 2025.
“Bank respondents expect stronger private sector credit growth at the end of December 2025, largely supported by the monetary policy easing by the CBK,” wrote the banking sector regulator.
“This easing has gradually lowered lending rates, stimulating borrowing by reducing the cost of new and existing variable-rate loans, thus increasing disposable income, and potentially boosting overall economic demand.”
The study says lenders cited low inflation as a key factor supporting demand for credit, arguing that price stability has cut uncertainty, improving planning conditions for borrowers.
Stable inflation, the survey notes, helps preserve purchasing power and reduces pressure on operating costs, making credit-financed consumption and investment more viable.
Beyond monetary conditions, banks pointed to strengthened product offerings as an additional driver of private sector credit growth. Surveyed respondents said expanded access to asset finance, trade finance and mortgage products is expected to improve credit availability across key segments of the economy.
Asset finance is seen as supporting firms seeking equipment and machinery, while trade finance is expected to aid businesses exposed to imports, exports and supply-chain activity.
Mortgage lending is also expected to contribute to credit growth as affordability widens access to housing finance. Despite the positive outlook, banks flagged risks that could constrain private sector lending, including cautious lending behaviour arising from elevated credit risk and concerns over asset quality.
Respondents noted a rise in non-performing loans, especially in the small and medium-sized enterprise segment and in unsecured lending, prompting banks to tighten credit standards.
The survey indicates that risk aversion remains high, limiting the pace at which lenders are willing to expand loan books despite improved macroeconomic conditions.
Banks also warned that concerns over credit quality could slow the transmission of monetary policy easing to private sector credit growth.
“Nevertheless, risks to private sector credit growth include cautious lending by banks due to elevated credit risk, concerns over credit quality and a rise in non-performing loans, especially in the SME and unsecured segments,” reads the survey.
