Kenya’s bank loan defaults surge to $5.6B in April 2025. Trade, tourism, and real estate among sectors under pressure.
Kenya’s Non-Performing Loans Surge to Record $5.6 Billion
NAIROBI, Kenya — August 7, 2025:
Kenya’s banking sector is under mounting pressure as non-performing loans (NPLs) rose to an all-time high of KSh 724.2 billion (approx. $5.6 billion) in April 2025, according to fresh data released by the Central Bank of Kenya (CBK) today. The latest figures signal worsening borrower stress and deteriorating credit quality across key economic sectors.
“The industry-wide gross NPL ratio now stands at 17.6%, the highest in over a decade,” CBK Governor Kamau Thugge told reporters at a media briefing in Nairobi. “We’re closely monitoring asset quality deterioration.”
This reflects a KSh 7 billion (roughly $54.3 million) increase in loan defaults compared to February 2025, driven by persistent macroeconomic strain, currency volatility, and soft business recovery.
Sectors Struggling: Trade, Tourism, and Real Estate
According to CBK’s Monetary Policy Committee update, sectors most affected by rising NPLs include:
- Trade
- Personal and household loans
- Real estate
- Hotels and tourism
“The elevated defaults in hospitality and real estate are a reflection of suppressed cashflows, especially after the high-interest rate regime implemented over the last 18 months,” said Gerald Nyaoma, Director of Bank Supervision at CBK.
In particular, banks flagged real estate-backed commercial loans and personal unsecured lending as high-risk segments.
What’s Behind the Rising Defaults?
Several structural and macroeconomic factors continue to weigh down borrowers:
- High interest rates: The CBK base rate remains at 13.0%, constraining access to affordable credit.
- Weakened shilling: The Kenyan Shilling trades at KSh 129.5 to the U.S. dollar, eroding import margins and household purchasing power.
- Delayed government payments: Contractors and suppliers cite pending bills exceeding KSh 600 billion ($4.5 billion) as a critical liquidity issue.
- Inflation pressure: While headline inflation eased to 6.1% in June, food and fuel prices remain elevated.
“Unless fiscal bottlenecks are addressed and confidence returns, we may see NPLs crossing KSh 750 billion before year-end,” said Paul Njaga, CEO of regional lender Equator Bank.
Banking Sector Response: More Provisions, Tightened Lending
Kenyan banks have responded with tighter credit standards, increased provisions for bad loans, and restructuring of existing facilities.
In the quarter ending March 2025:
- Loan-loss provisions rose 12.4% year-on-year, according to CBK reports.
- Loan restructures now account for KSh 132 billion ($1 billion), up from KSh 98 billion in December 2024.
Outlook: Cautious Optimism or Warning Signs?
While the Kenyan economy is expected to grow by 5.3% in 2025 (World Bank projection), the disconnect between GDP growth and private sector health remains stark.
“We have a banking system that’s well capitalized, but that doesn’t mean immune,” warned Njuguna Kariuki, a Nairobi-based banking analyst. “Credit risk is now the biggest threat to banking stability.”
CBK Governor Thugge emphasized that reforms are in place to safeguard systemic risk but admitted that “the coming quarters will test banking resilience.”