The Next Wave: Kenyan banks have forgotten how to lose money

Lending is a enterprise constructed on the danger that somebody is not going to pay again. A borrower defaults, a harvest fails, or a foreign money loses worth. Yet Kenya’s largest industrial banks appear insulated from the financial circumstances their debtors face. Their earnings continue to grow whilst households and companies come underneath strain.

I spent the final two days going via 5 years of audited reports from Kenya’s largest lenders, on the lookout for a foul 12 months. I couldn’t discover one. Not a single tier-1 financial institution recorded an annual internet loss over the interval. Combined pre-tax earnings rose 18.6% in 2023 to KES 260.09 billion ($2 billion) in 2024, earlier than rising one other 17.6% to KES 305.95 billion ($2.36 billion) in 2025.

NCBA Group, for instance, offers a glimpse of how worthwhile the interval has been. Its revenue after tax grew 409% from 2020 to KES 23.4 billion ($180.1 million) in 2025. Dividend payouts additionally rose 368% to KES 11.7 billion ($90.1 million).

But document earnings don’t essentially imply banks have stopped lending. There are causes banks are cautious. A enterprise with irregular gross sales, incomplete accounts and no property to supply as collateral is more durable to assess than a authorities bond. Recovering a foul mortgage may take years, with authorized and administrative prices consuming into no matter a financial institution may get well.

A 2026 Kenya Bankers Association working paper, utilizing knowledge from the 2018 World Bank Enterprise Survey, provides an attention-grabbing perspective. Roughly three-quarters of small companies that may want financing by no means apply for financial institution loans. They count on rejection, can not meet collateral necessities, or discover borrowing too costly. Of those that apply, greater than 90% are permitted.

The downside, then, is that any potential debtors by no means make it via the door.

Banks additionally have to account for rising bad-loan prices. The trade’s non-performing mortgage ratio reached 16.4% in December 2024, in accordance to the Kenya Bankers Association. As compensation turns into much less predictable, lenders have motive to tighten credit score assessments.

Government securities supply another choice; by late 2024, they accounted for 27.8% of banking sector assets, whereas the loan-to-deposit ratio had fallen to 70.1%. Lending to the state provides banks another to assessing 1000’s of companies with completely different money flows, credit score histories and compensation dangers.

While large lenders backed away from underwriting native companies, they noticed a gap in shopper funds by partnering with cellular telecom networks.

Safaricom runs Fuliza, its overdraft facility, alongside NCBA and KCB (Sidian Bank is becoming a member of this profitable product). At its investor briefing in Nairobi on Thursday, Safaricom stated Fuliza brought in KES 4.9 billion ($38 million) in income within the six months to September 2026, up 86% 12 months on 12 months. The overdraft accounts for 71% of Safaricom’s KES 7.0 billion ($54.3 million) credit portfolio revenue.

Over these six months, Fuliza disbursed KES 1.16 trillion ($8.97 billion)—up 84%—and picked up KES 1.15 trillion ($8.94 billion), reaching a 99.6% restoration fee via automated pockets deductions. Its buyer base grew 88.9% to 17.2 million debtors.

Yet the common advance fell 24.6% to KES 192 ($1.49), down from KES 254.60 ($1.97).

Fuliza works otherwise from a standard financial institution mortgage as a result of it’s tied to M-PESA transactions, includes automated deductions, and handles 1000’s of small advances via an present funds community, giving its lending companions a method to assess and get well credit score at a scale that may be tough to replicate via conventional mortgage purposes..

For bigger sums, shoppers flip to digital credit score suppliers (DCPs). In the six months to June 2026, DCPs lent out KES 43.7 billion ($336.4 million), pushing their whole excellent mortgage guide to KES 153.8 billion ($1.18 billion), a 39.6% leap from December 2025.

Kenya now has 281 licenced digital lenders serving 8.9 million clients, with common loans at KES 17,280 ($133.02) on one-week to two-month phrases. According to the Central Bank of Kenya (CBK), 45% of customers borrow to inventory retailers, 37% pay faculty charges, and 23% buy meals. These amenities cost day by day charges round 0.6%, or roughly 24% every month. FinAccess survey reports that 16.6% of Kenyan households face debt misery, up from 10.3% in 2021.

Kenyan banks have not stopped lending to companies. In 2025, they disbursed KES 326.5 billion ($2.5 billion) to micro, small, and medium enterprises (MSMEs), with greater than 73% of excellent loans issued with out collateral. Access stays uneven, although: women-led companies made up 46% of MSME debtors however obtained simply 25% of excellent credit score, according to the Kenya Bankers Association.

Banks have good motive to fear about defaults, however companies with out formal accounts, predictable money flows or property to pledge typically wrestle to qualify. Lenders should discover methods to assess these companies with out exposing themselves to losses they can’t soak up.

Kenn Abuya

Senior Reporter, TechCabal

Thank you for studying this far. Feel free to electronic mail kenn[at]bigcabal.com, along with your ideas about this version of NextWave. Or simply click on reply to share your ideas and suggestions.