Kenya’s central bank has squeezed some Ksh277.9 billion ($2.15 billion) from commercial banks to be lent out to the productive sectors of the economy in eight consecutive policy rate cuts over the past 15 months.

The regulator has threatened financial sanctions to lenders disobeying the monetary policy direction.

The extra lending by commercial banks to the private sector in the wake of the monetary policy easing constitutes only 6.85 percent of the banks’ total loans to the private sector -- estimated at Ksh4.05 trillion ($31.39 billion) in November 2025.

Disclosures by the central bank show that lenders’ total loans to the private sector increased 7.35 percent (Ksh277.9 billion) to Ksh4.05 trillion ($31.39 billion) in November 2025, from Ksh3.77 trillion ($29.22 billion) in August 2024.

During this period (August-November) CBK implemented eight consecutive policy rate cuts, reducing the benchmark lending rate by 375 basis points to 9.25 percent in October 2025 from 13 percent in August 2024.

On December 9, the regulator lowered the policy rate by a further 25 basis points to nine percent, the ninth policy rate cut in a row, to boost spending by households and businesses and spur economic activities.

“This will augment the previous policy actions aimed at stimulating lending by banks to the private sector and supporting economic activity, while ensuring inflationary expectations remain firmly anchored, and the exchange rate remains stable,” said CBK Governor Kamau Thugge said in a statement after the Monetary Policy Committee (MPC) meeting.“The MPC will closely monitor the impact of this policy decision as well as developments in the global and domestic economy and stands ready to take further action as necessary in line with its mandate,” the governor said.

Banks were charging an average interest rate of 15.07 percent for loans at the end of September 2025, having dropped from 17.22 percent at the beginning of the year, with the decline tracking CBK’s eight consecutive rate cuts from 13 percent in August 2024.

The average lending rates declined further to 14.9 percent in November 2025, from 15 percent in October.

Private sector credit growth had slowed to a five-year low by June 2024, growing by four percent and marking a significant drop from the start of the year, when it grew by 13.9 percent in December 2023.

After monetary policy tightening in early 2024, the CBK started easing rates from August 2024 to boost economic activity.

The previous rate hikes had caused a slowdown in credit to the private sector, marking the slowest pace in years, influenced by reduced disposable income and business cash flow issues.

For instance, in July and August 2024, commercial bank lending to Kenya’s private sector slowed significantly, to around 3.7 percent in July and then 1.3 percent growth in August, impacted by high interest rates, a strengthening shilling (impacting foreign currency loans), and reduced borrowing demand from businesses and households.

The slow credit growth has been a major concern of CBK’s monetary policy committee for the past year, which has seen it take diverse actions to push banks to lend more.

Dr Thugge has called on banks to stop making excuses and pass on the benefits of the monetary policy decisions to the public through lower interest rates.

CBK in March cautioned banks against refusing to lower their lending rates in line with the monetary policy adjustments, warning lenders found flouting the rule of severe penalties, including fines amounting to three times the gains made from the high lending rates.

Banks have had the alternative of taking up risk free lending to government via bonds and treasury bills shielding themselves from losses due to the elevated default rate on customer loansThe banking industry’s ratio of gross non-performing loans (NPLs) to gross loans was 16.5 percent in November 2025, down from 16.7 percent in October and 17.6 percent in August.

According to CBK, the decrease in NPLs were noted in the mining and quarrying, energy and water, personal/household, and transport and communication sectors. Banks have continued to make adequate provisions for the NPLs.

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