Local commercial banks increased lending to micro, small and medium enterprises (MSMEs) by 30% over the first nine months of 2026, reaching Ksh 424.7 billion as credit costs fell.

The Kenya Bankers Association (KBA) data shows the rise from Ksh 326.5 billion recorded over the same period in 2025, indicating a strong push to expand credit to small businesses.

Equity Bank led the market, disbursing Ksh 128 billion to MSMEs – about 30.1% of total sector loans – the largest share among banks.

KBA noted that Equity’s disbursements were more than double those of its nearest rival, Co‑operative Bank, and more than three times the volume of third‑placed KCB.

Co‑operative Bank ranked second with Ksh 60.3 billion in MSME loans, representing 14.2% of total sector credit.

KCB Bank, Family Bank and NCBA together contributed Ksh 41.1 billion, Ksh 31.8 billion and Ksh 25.9 billion respectively during the same period.

The association attributes the sustained growth to a softer macro‑economic climate, lower borrowing costs and revived private‑sector demand.

Average commercial‑bank lending rates fell to 14.4% in September 2026 from 17.2% recorded in November 2024, making credit cheaper for borrowers.

KBA also reported an improvement in loan repayment, with the gross non‑performing loan ratio dropping to 13.9% from 14.8% in June 2026 and 17.6% a year earlier.

The reduction in bad loans is linked to stronger credit‑risk appraisal and healthier cash flows as supply‑chain bottlenecks and inflationary pressures eased.