Equity leads MSME lending as banks more than double Sh150bn target; rate cuts to flow through to borrowers
Kenyan banks more than doubled new lending to micro, small and medium enterprises (MSMEs) in 2025, advancing Sh326.5 billion against an annual target of Sh150 billion, according to the Kenya Bankers Association. Equity Bank led the sector with Sh90.7 billion, about 28 percent of MSME credit, reinforcing its dominance in small-business financing amid rising demand for working capital and trade lines.
KCB followed with Sh56.2 billion, Co-operative Bank with Sh37.7 billion, Stanbic at Sh32.7 billion, and Family Bank with Sh32.0 billion. Together, the top five lenders accounted for roughly three-quarters of the new MSME credit, underscoring the concentration among major banks even as overall demand grows.
Mid-tier lenders also stepped up: I&M Bank advanced Sh26.3 billion, Kingdom Bank Sh9.8 billion, Absa Sh6.4 billion, National Bank Sh5.8 billion, and Sidian Bank Sh5.5 billion, reflecting intensifying competition for SME clients through supply-chain finance, invoice discounting and sector-focused programs.
Analysts attribute the surge to a stabilising shilling, gradual easing of lending rates, and broader uptake of the public credit guarantee scheme, which has strengthened banks’ willingness to extend risk-weighted loans to small businesses.
Equity aligns lending to CBR as easing cycle gathers pace
Equity Bank reiterated that it is passing Central Bank of Kenya (CBK) rate cuts directly to borrowers. Group MD and CEO Dr. James Mwangi said the bank has aligned its variable-rate loans to the Central Bank Rate (CBR), with pricing set at CBR plus a fixed premium and adjusting automatically after each Monetary Policy Committee (MPC) decision.
“We are very excited that the banking industry, with our regular CBK, has now found a formula that will tag our lending rates to the central bank rates. The day central bank reduces its rates is an automatic reduction of your lending rate,” Dr. Mwangi said on Wednesday, March 18, when the bank released its record 2025 financial results.
The MPC last met on February 10, 2026, cutting the CBR by 25 basis points to 8.75 percent, its fourth consecutive quarterly reduction. The next announcement is expected on April 8, 2026. Dr. Mwangi said the sustained easing cycle is reshaping borrowing behaviour after years of subdued appetite: “For the last six years, we have been experiencing declining lending, particularly in Kenya, and it’s for the first time we have seen appetite.”
Beyond rate transmission, Equity is also retooling how and to whom it lends. Dr. Joanne Korir, Director of Equity Group Foundation, outlined the scale of the Young Africa Works programme with the MasterCard Foundation, targeting youth enterprise and jobs across the region.
“We’ve been able to onboard 962,000 MSMEs into the programme, of whom 720,000 have received mentorship. In terms of access to credit to fuel their businesses, we’ve seen approximately 3.12 billion US dollars, which is about Sh390 billion, extended to these MSMEs,” Dr. Korir said. She added that job creation has reached approximately 2.4 million against an initial target of 810,000.
To support sustainability, Dr. Mwangi noted the bank is extending loan tenors within the programme from six months to as long as 24 months to help young entrepreneurs build stronger credit histories and business balance sheets.
Equity posted a 55 percent rise in profit after tax to Sh75.5 billion, described by the bank as the highest in Kenya’s corporate history. The balance sheet expanded nine percent to Sh1.97 trillion, with net loans up eight percent to Sh882.5 billion, providing headroom to meet resurgent MSME demand as the rate environment eases.