Commercial lenders have disbursed KES 153 billion to micro, small, and medium-sized businesses (MSMEs) so far in 2025, marginally surpassing the annual target of KES 150 billion set by the banking industry.
As of May 2025, loan disbursements to MSMEs stood at KES 81.4 billion, signaling high lending in June, July, and August that increased the disbursed amount to KES 153 billion.
According to bankers, the above-target performance is primarily due to the abandonment of traditional lending frameworks to MSMEs, which, according to them, were chosen with a “one size fits all” philosophy, preventing many potential beneficiaries from obtaining finance from the banking industry.
Loan approval rates were high, while rejections were mostly due to repayment capacity constraints, a lack of collateral, and incomplete documentation, all of which affect MSMEs. MSMEs frequently lack audited financial statements, have short credit histories, or operate informally without assets that meet standard collateral requirements.
As of July 2025, non-performing loans accounted for 17.6% of the total loan book. Factors like inflationary pressures and declining household spending power have made this worse by weakening repayment ability, especially for MSMEs. Lenders have said that there is a need to step up measures aimed at granting relief to struggling MSMEs through the extension of moratoria on payment terms.
In 2024, 12,500 MSME loan facilities worth KES 38.2 billion were restructured within the banking sector. As of December 2024, these made up 0.08% of all loan accounts and 1.04% of the gross loan portfolio’s total value. The main goal of the reorganization was to give borrowers more control over their credit performance.
MSMEs Survey 2024
As of December 2024, the value of MSME loans as a percentage of the entire banking sector loan portfolio was 21.4%, a slight rise from 21.3% in December 2022 . The MSME loan portfolio brought in over KES 91.8 billion for the banking industry in the 12 months ended December 2024, up from KES.79.1 billion during the same time frame in 2022. MSMEs remained a major source of capital for the banking sector, making up 16.9% and 79.7% of all customer deposits held in commercial banks and MFBs, respectively.
Banks have created a variety of products to meet the unique requirements of the MSME sector. Over 55% of commercial banks offer products that serve all three MSME categories – micro, small, and medium enterprises. 13% concentrate solely on medium-sized businesses, and 16% offer items primarily for the small and medium market groups. Only micro and small businesses are the focus of 21% of microfinance banks (MFBs), whereas 36% of them provide products for all three categories.
The trade sector received the greatest share of MSME loans from commercial banks (39.5%), closely followed by the real estate sector (18%) and the transportation and communication sector (9.3%). The industries with the lowest allocations were mining, financial services, and energy, with 1.3%, 2.9%, and 3.3%, respectively.
In micro finance banks, the trade sector also received the biggest share of MSME loan portfolio (44.2%), followed by the agriculture sector (13.5%) and the building and construction sector (11.5%), in that order. With corresponding allocations of 1.6% and 0.7%, the mining and energy sectors received the smallest share.
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