• Commercial banks in Kenya earned record profits in 2024 but are still urging the central bank to lower interest rates.
• Loan costs remain high for borrowers, with average lending rates above 16%, while credit to the private sector has dropped to a 22-year low.
• Talks are underway to revise loan pricing rules, as digital lenders step in to support struggling SMEs.

Kenya’s commercial banks made a record 262 billion shillings ($2.02 billion) in profit in 2024—up 11.58% from the year before. But despite that strong performance, they want the Central Bank of Kenya (CBK) to cut interest rates even further to help unlock credit for the private sector.

The central bank has already lowered its benchmark rate from 13% in August 2024 to 10.75%. But the Kenya Bankers Association says that is not enough. With inflation and the exchange rate holding steady, and the economy expected to grow 5.4% in 2025, the group argues that more affordable credit is essential to fuel expansion.

There is a bigger issue, though. Kenya’s loan pricing model is risk-based, meaning banks set rates depending on how risky a borrower appears. That system weakens the link between the central bank’s policy rate and actual lending rates. In fact, only 5 of the country’s 38 banks passed along the CBK’s recent rate cuts to their customers. Fourteen banks actually raised their rates.

As of February 2025, the average lending rate stood at 16.44%, only slightly down from 17.22% in November. That is still far higher than in parts of West Africa. For example, the average lending rate in the West African Economic and Monetary Union (WAEMU) was 6.81% in January 2025, according to the BCEAO. The nearly 10-point gap between Kenya and WAEMU highlights the uneven access to affordable credit across Africa.

High borrowing costs have taken a toll. Credit to the private sector in Kenya has dropped to its lowest level in more than two decades. Non-performing loans have climbed, too—hitting 16.5% in December 2024 after peaking at 16.7% in August. That is the highest the country has seen in nearly 20 years.

Small and medium-sized businesses are feeling the pinch the most. Around 60% of their loan applications are rejected, mostly due to a lack of collateral. A recent survey found that 75% of SMEs view access to credit as a top priority—40% are seeking funds to grow, while 21% need support for daily operations.

The CBK has warned banks that it may take action if they continue to ignore interest rate cuts. At the same time, discussions are ongoing to revise how loans are priced. Meanwhile, fintechs are trying to fill the gap. Startups like Sokowatch and Zanifu are offering short-term financing to small businesses. And as banks go digital, they are also getting better at assessing risk, which could eventually make credit more accessible.