Equity, Co-op lead in Sh424bn new loans to small businesses

Kenyan banks have made significant strides in lending to small businesses, with Equity Bank Kenya and Co-operative Bank of Kenya leading the charge. According to the Kenya Bankers Association (KBA), banks extended Sh424.67 billion in fresh loans to micro, small and medium enterprises (MSMEs) in the nine months to September 2026. This represents a 30 percent rise from Sh326.5 billion disbursed in the whole of last year. The growth in lending indicates a rising focus of banks on small firms.

Equity Bank led the market with Sh127.95 billion in new MSME loans, representing 30.1 percent of the industry total, followed by Co-operative Bank with Sh60.26 billion or 14.2 percent. KCB Kenya ranked third with Sh41.1 billion, followed by Family Bank at Sh31.84 billion and NCBA with Sh28.69 billion. These top lenders are playing a crucial role in supporting small businesses, which are key to Kenya's economy.

The 10 largest lenders accounted for Sh387.6 billion, representing 91.3 percent of the industry's Sh424.67 billion in new MSME loans. This highlights the concentration of small business financing among a handful of banks. The figures also show that banks are increasing their support for small businesses, but there is still a need for more long-term financing to help businesses buy equipment, expand their operations, and create jobs.

The Sh424.67 billion lending puts banks within reach of their Sh500 billion target for new MSME financing in 2026, having achieved nearly 85 percent of the goal in the first nine months. The expansion in credit comes against a backdrop of declining borrowing costs, with average commercial bank lending rates falling to 14.4 percent in September from 15.07 percent in a similar period last year and 16.91 percent in September 2023.

Private-sector credit growth also improved to the highest level since February 2024 at 10.6 percent in September this year from 10.3 percent a month earlier. This points to continued recovery in banks' lending to businesses and households. Additionally, banks are reporting an improvement in loan repayments, easing the pressure from rising defaults that had constrained lending.

Central Bank of Kenya data shows gross non-performing loan (NPL) ratio declined to 13.9 percent in September this year from 14.8 percent in June and 17.6 percent in August 2025. A sustained improvement in loan repayment rates could motivate more lenders to increase lending to small businesses, which are often considered riskier borrowers due to limited collateral, informal records, and unpredictable cash flows.

Small businesses are key to Kenya's economy, supporting employment, household incomes, and business activity across sectors. However, access to affordable credit has remained a key constraint, as many smaller enterprises struggle to meet conventional bank lending requirements. Top banks, including KCB, Equity, Co-op, and NCBA, have been attracting cheap credit from development finance institutions for on-lending to small businesses, especially those led by women and youth.

Key points

• Banks extended Sh424.67 billion in fresh loans to small businesses in the nine months to September 2026.
• Equity Bank Kenya and Co-operative Bank of Kenya accounted for nearly half of the additional disbursements.
• The 10 largest lenders accounted for 91.3 percent of the industry's Sh424.67 billion in new MSME loans.