Private businesses are enjoying renewed access to funding after credit flows to the sector quadrupled in June 2025, largely driven by policy shifts that made borrowing cheaper for banks and their customers.
According to Treasury data, monthly loans to the private sector rose to Sh10.7 billion in June, compared to Sh2.5 billion during the same period last year, ending a five-year stretch where lenders were reluctant to advance funds.
The Treasury’s draft Budget Review Outlook Paper (BROP) linked the sharp rise in credit to monetary policy decisions, including the lowering of the Central Bank’s indicative lending rate and a cut in the cash reserve ratio (CRR).
In February, the Central Bank reduced the CRR from 4.25 percent to 3.25 percent, releasing about Sh73.7 billion into the banking system for onward lending. By August 12, the CBK had trimmed its lending rate to 9.50 percent, the seventh straight cut since May 2023, bringing it to a two-year low.
“This is due to the easing of the monetary policy rate and the reduction of the CRR (Cash Reserve Ratio) to lower the cost of funds for banks,” reads the Treasury paper.
It added that “sustained demand, particularly for working capital due to resilient economic activities and the implementation of the Credit Guarantee Scheme for the vulnerable MSMEs, will continue to support private sector credit uptake.”
Despite the gains, the Treasury noted that overall credit growth slowed to 2.2 percent in the year to June 2025, down from 4 percent in the year to June 2024. It attributed this moderation to subdued lending in sectors such as finance and insurance, mining, trade involving imports, business services, and households—industries that hold large foreign currency-denominated loans.
“This growth reflects improved demand in line with the declining lending interest rates, and dissipation of exchange rate devaluation effects on foreign currency-denominated loans following the appreciation of the shilling,” the BROP stated.
A Central Bank survey published in August reinforced the Treasury’s outlook, showing that banks reported better liquidity during the three months to June, buoyed by higher customer deposits and aggressive recovery of non-performing loans.
The survey found that 87 percent of the 36 commercial banks involved had stronger liquidity positions, while 13 percent reported declines. Improved maturity of government securities and fresh shareholder capital also helped strengthen lenders’ ability to advance more loans.
