Cleaner Books: Kenya Banks' Bad Loans Fall to 13.9% as Private Sector Credit Growth Reaches 10.6%Cleaner Books: Kenya Banks' Bad Loans Fall to 13.9% as Private Sector Credit Growth Reaches 10.6%
Key Highlights
- The gross non-performing loan ratio for Kenyan banks fell to 13.9% in September from 14.8% in June, and from 17.6% in August 2025, a sign that repayment pressure is easing.
- Commercial bank lending to the private sector grew 10.6% in September, up from 10.3% in August, having contracted 2.9% in January 2025 before the recovery took hold.
- Average lending rates were 14.4% in September, up from 14.3% in August but below 17.2% in November 2024, while the Central Bank Rate was held at 8.75% on 7 October.
Kenya's banks reported a lower share of bad loans in September, with the gross non-performing loan (NPL) ratio falling to 13.9% from 14.8% in June as lending to the private sector picked up.
The shift matters because lenders with fewer unpaid loans are better placed to extend credit, which households and firms have been short of. The figures come from the Central Bank of Kenya Monetary Policy Committee statement of 7 October, as reported by People Daily. The ratio stood at 17.6% in August 2025, so the fall over the year is 3.70 percentage points.
Credit growth turns positive
Commercial bank lending to the private sector grew 10.6% in September, up from 10.3% in August. In January 2025 it was shrinking by 2.9%.
Average lending rates were 14.4% in September, up from 14.3% in August, but still below the 17.2% recorded in November 2024. With the Central Bank Rate held at 8.75%, the average lending rate sits 5.65 percentage points above it.
What the figures do not show
The report does not give an August 2026 NPL figure, so the pace of improvement within the quarter is unclear, and it does not break the ratio down by sector or lender. A lower ratio can also reflect write-offs and loan restructuring as well as repayments, and the figures do not separate the three.
As Mwenendo earlier reported, the Central Bank held its rate at 8.75% on 7 October and raised its 2026 growth projection to 5.0% from 4.9%. Growth at that pace depends partly on credit reaching businesses.
Access still varies by borrower. Mwenendo earlier reported on how banks and state agencies share risk to fund small businesses that lack title deeds to pledge as security. The next Central Bank release will show whether bad loans keep falling as credit growth builds.
In Summary
- What happened to bad loans?
- The gross NPL ratio fell to 13.9% in September from 14.8% in June.
- Who reported it?
- The Central Bank of Kenya, in its Monetary Policy Committee statement.
- When was the statement issued?
- On 7 October 2026.
- Where does it apply?
- Across Kenya's commercial banking sector.
- Why does it matter?
- Fewer bad loans leave banks better placed to lend, and private sector credit grew 10.6% in September.
- How have lending rates moved?
- Average rates were 14.4% in September, up from 14.3% in August but below 17.2% in November 2024.