More than two-thirds of Kenyans have abandoned plans to take new loans this year, largely due to high costs, underscoring the impact of the slow response of commercial banks to Central Bank Rate (CBR) cuts.
Some 68 percent of Kenyan adults say they have shelved plans to apply for new loans over the next 12 months, up from 66 percent last year, a survey by Credit Reference Bureau TransUnion shows.
High borrowing costs remain the most cited reason for abandoning applications, mentioned by 42 percent of respondents, up from 41 percent last year.
This comes despite the CBR dropping by more than three percentage points over the past year, which should have lowered the cost of credit, but banks have been slow to adjust.
“Overall, 68 percent of consumers considered applying for credit or refinancing but ultimately chose not to proceed,” said TransUnion in its annual Consumer Pulse Study for Q2 2025.
“The top reasons for inaction were high borrowing costs, access to alternative funding, and concerns about being rejected due to income or employment status. These findings highlight how affordability and perceived ineligibility continue to limit access to formal credit channels in Kenya.”
The CBR fell from a 12-year high of 13 percent in May last year to 10 percent this year, yet the average lending rate only eased slightly—from 16.6 percent to 15.65 percent over the same period.
The survey further shows Kenyans are increasingly sensitive to rate changes, with 61 percent, saying rising interest rates heavily influence their credit decisions, while 32 percent report a moderate impact.
Besides high costs, a lack of stable income or employment, repayment challenges, and absence of a credit history also rank among the main reasons Kenyans dropped loan application plans this year.
Of those still planning to borrow in the next 12 months, 54 percent are eyeing personal loans, 39 percent prefer mobile loans, and 32 percent intend to take up buy-now-pay-later (BNPL) options.
At the same time, fewer Kenyans report mounting financial pressure, with 62 percent saying they will miss at least one bill or loan payment in the next three months—a slight drop from 64 percent last year.
Some 61 percent say they have cut back on non-essential spending such as dining out, travel, and entertainment, while 30 percent are directing more of their income to savings.
“By delaying spend on big-ticket items and finding ways to manage their debt effectively, consumers are signalling mature credit behaviour, which in turn is likely to be a driver for economic growth into the future,” said Morris Maina, TransUnion Chief Executive.
Most commercial banks are already feeling the heat of pessimism from borrowers.
For example, Stanbic Bank Kenya's net loans and advances fell by Sh5.1 billion in six months to June 2025 to Sh233 billion from Sh238.1 billion previously, while Equity Bank Kenya’s loan book narrowed by Sh8.6 billion in the same period.
Absa Bank Kenya’s net loans and advances, meanwhile, fell by Sh11.4 billion from Sh316.3 billion to Sh304.9 billion.
KCB Bank Kenya and the Co-operative Bank of Kenya, however, defied the shrinking loan book trend to grow loans and advances to customers over the half-year period by Sh98.8 billion and Sh8.7 billion, respectively.
