Kenya’s private sector credit stock surged to an all-time high of Kshs 4.1 tn in March 2026, with year-on-year growth accelerating to 8.1% the fastest pace recorded in over two years. This milestone surpasses the previous peak of Kshs 3.9 tn set in January 2024, which the sector only regained in September 2025 after declining to a low of Kshs 3.8 tn. The latest data marks the sixth consecutive month of record-breaking credit expansion, signaling a sustained recovery from the (2.9%) contraction recorded in January 2025.
The rebound in private sector credit has been underpinned by strong banking sector liquidity, declining lending rates, and broad-based demand across key sectors of the economy. Growth has steadily improved over the past 14 months, rising from 0.2% in March 2025 to 2.0% in May, 5.0% in September, and ultimately reaching 8.1% in March 2026. This recovery, amounting to over 1,100 basis points, has coincided with the Central Bank of Kenya’s aggressive monetary easing cycle, which saw the benchmark rate cut from 13.0% in June 2024 to 8.75% in February 2026. Over the same period, average commercial bank lending rates declined from 17.2% in November 2024 to 14.7% in March 2026.
Insights from the December 2025 Credit Officer Survey, which covered 38 commercial banks and one mortgage finance institution, had already pointed to this upward trend. A majority of banks (86%) reported improved liquidity in Q4 2025, supported by a 5.4% increase in deposits to Kshs 6.3 tn and a 2.6% rise in gross loans to Kshs 4.4 tn. Notably, 59.0% of respondents attributed the anticipated increase in credit demand to the Central Bank’s rate cuts, with most institutions prioritizing private sector lending in early 2026.
Sectoral performance reveals a mixed but generally positive picture. Building and construction recorded the strongest growth, expanding by 37.1% to KSh 184.40 billion, followed by agriculture, which grew by 28.9% to Kshs 192.0 bn. Consumer durables rose by 11.7% to Kshs 479.6 bn, while trade, remaining the largest sector, expanded by 8.9% to Kshs 739.4 bn. However, some sectors lagged behind, with transport and communications contracting by 10.1%, real estate declining by 2.1%, and business services shrinking by 3.9%. Manufacturing, the second-largest sector, posted marginal growth of just 1.2%.
The continued decline in lending rates has been a key driver of this credit expansion, further supported by the full rollout of the revised Risk-Based Credit Pricing Model in March 2026, which is expected to enhance the transmission of monetary policy.
Despite the strong growth in credit, asset quality remains a concern. The gross non-performing loan (NPL) ratio edged up slightly to 15.6% in March 2026 from 15.4% in December 2025, marking the second increase this year. The deterioration was primarily observed in the personal and household, trade, agriculture, and manufacturing segments, aligning with earlier projections from the December 2025 survey. Nonetheless, the ratio remains significantly below the peak of 17.6% recorded in August 2025, reflecting improvements driven by a reduction in gross NPLs and continued loan book expansion.
Overall, the banking sector remains stable and well-capitalized. The capital adequacy ratio stands at 20.0%, while the liquidity ratio is at 59.3%, well above the statutory minimum of 20.0%. Profitability has also improved, with profit before tax rising to Kshs 83.9 bn in Q4 2025 from Kshs 79.8 bn in Q3.
Looking ahead, banks are expected to intensify recovery efforts, particularly in sectors with elevated credit risk. Trade, real estate, personal and household, and construction have been identified as priority areas for loan recovery initiatives in the near term, as institutions balance credit growth with asset quality management.
