Private sector credit growth in Kenya more than doubled to 10.6 per cent in September 2026 from 5 per cent in September 2025, signalling a recovery in bank lending as borrowing costs eased, according to the World Bank’s November 2026 Kenya Economic Update.
The improvement followed a period of monetary easing in which the Central Bank of Kenya (CBK) reduced its benchmark Central Bank Rate by a cumulative 250 basis points, from 11.25 per cent in January 2025 to 8.75 per cent in February 2026.
Commercial bank lending rates also declined, falling to 14.4 per cent in September 2026 from 15.1 per cent a year earlier. The lower rates helped reduce the cost of borrowing and supported demand for credit from businesses and households.
The recovery in lending was not uniform across the economy. Credit expanded particularly strongly in mining and quarrying, agriculture, finance and insurance, and trade. Lending to building and construction also continued to grow, although at a slower pace than earlier in 2026.
However, credit to manufacturing and real estate contracted in September 2026. The decline in manufacturing lending came despite improved output in the sector, suggesting that some firms may have relied on non-bank financing or their own resources instead of taking on additional bank loans.
The CBK maintained its policy rate at 8.75 per cent at its April, August and October 2026 Monetary Policy Committee meetings. The decision reflected the need to contain inflationary pressures and support exchange rate stability while monitoring domestic and international economic developments.
The World Bank said near-term financial sector indicators had improved alongside the expansion in private sector credit. The banking sector’s asset quality, capital and liquidity positions also strengthened, although exposure to government debt remained a source of vulnerability.
The recovery in credit is significant because access to affordable financing can help businesses fund operations, invest in equipment and expand production. However, the contraction in lending to manufacturing and real estate shows that improved overall credit growth has not translated into stronger borrowing across all productive sectors.
The outlook for lending will depend partly on inflation, monetary policy and the Government’s financing needs. The World Bank has warned that elevated public debt service costs and further fiscal slippage could increase government borrowing and crowd out credit available to private businesses.
