Kenyan Banks See Bad Loans Fall to 13.9% in SeptemberKenyan Banks See Bad LoansFall to 13.9% in September

The Central Bank of Kenya's 7 October Monetary Policy Committee statement records the decline. A lower ratio means a smaller share of banks' gross lending is classified as non-performing, but the aggregate figure alone does not explain why it fell or whether credit has become easier to obtain.

Non-performing loans are facilities that are no longer being repaid as agreed and meet the regulator's criteria for that classification. The 13.9% ratio is measured by loan value, not by the number of customers. It should not be read as meaning that 13.9% of Kenyan borrowers have defaulted.

The figures offer a useful signal about loan quality, which affects how lenders assess risk and set aside money for possible losses. But a lower ratio does not mean every bank is seeing the same improvement, and it does not show whether the change came from repayments, write-offs, changes in the total loan book or a combination of factors.

Loan quality and access to credit are different measures

Borrowers also face the cost of credit. As Mwenendo earlier reported, average bank lending rates stood at 14.34% in August. That rate measures the price of borrowing, while the non-performing loan ratio measures the share of loans classified as troubled. One can change without an equal movement in the other.

For small businesses, the distinction matters. A bank may report fewer problem loans while still applying strict checks to new applications, especially where a borrower lacks predictable income or assets to secure a facility. The ratio does not reveal approval rates, loan sizes or the terms offered to different customers.

In an earlier report by Mwenendo, risk-sharing schemes for small businesses showed one way banks and public agencies can share lending risk to widen access to finance. Such arrangements address access to credit, while the September ratio provides a broad measure of how existing loans are performing.

The next useful test is whether the improvement continues in later banking-sector data and whether the Central Bank provides a breakdown by industry or loan category. Without that detail, the September figure is evidence of a lower overall ratio, not proof that every borrower or lender faces less pressure.