Kenya's banks smash 2025 MSME lending targets with Ksh.326.5 billion surge

Kenya's banking sector extended Ksh.326.5 billion in new loans to micro, small and medium-sized enterprises (MSMEs) in 2025, shattering the industry's annual target of Ksh.150 billion by more than double. This is according to data from the Kenya Bankers Association (KBA).

The figure marks a dramatic acceleration from earlier in the year, when the KBA had already declared a milestone. By September 2025, banks had disbursed Ksh.153 billion, just above the annual target, prompting KBA Chief Executive Officer Raimond Molenje to declare that the sector had surpassed its commitment. The full-year tally of Ksh.326.5 billion suggests lending momentum continued to build sharply through the final quarter.

Equity Bank dominated the sector's MSME lending throughout the year. KBA ranked Equity Bank as the market leader in SME lending, with over Ksh.90.7 billion disbursed to small businesses in the year to July 2025 alone, representing 45 per cent of all MSME loans extended by the industry between January and July. The bank was subsequently recognised at the KBA Sustainable Finance Initiative Awards as the Best Bank for MSME Financing.

Equity's nearest rivals were some distance behind. Between January and May 2025, Co-operative Bank disbursed Ksh.12.6 billion to small businesses, while KCB Bank reported Ksh.11.1 billion over the same period.

The surge in lending comes on the back of a public commitment made in October 2024, when the banking industry pledged Ksh.150 billion annually towards MSMEs over three years starting 2025, a move President William Ruto commended as doubling the sector's financial commitment to small businesses. The government promised to back the initiative with policy support, including measures to accelerate the settlement of pending bills owed to MSME suppliers.

The scale of the ambition reflects the economic weight of small businesses in Kenya. The MSME sector employs between 80 and 90 per cent of the country's workforce and contributes roughly one third of national GDP. Yet access to affordable credit has historically been a persistent barrier, with small businesses citing high interest rates, limited collateral and the perception of elevated credit risk as the main obstacles to financing.

The increased lending has been driven by several factors, including lower interest rates following policy easing by the Central Bank of Kenya (CBK), improved credit appraisal models, and the adoption of alternative data in lending decisions. For borrowers, the injection of credit has translated into tangible benefits, small traders restocking inventory, manufacturers investing in machinery, and service businesses expanding operations, with knock-on effects on employment at the community level.

Looking ahead, KBA has reaffirmed a collective industry commitment to lend Ksh.300 billion in new loans annually to the MSME sector over the 2026 to 2028 period.