Commercial banks disbursed a record Sh99.4 billion loans in September, marking the highest monthly lending in at least five years and underlining the strong recovery of private sector credit growth in the economy.
Data from the Central Bank of Kenya (CBK) place the absolute credit flow from commercial banks at Sh99.4 billion, surpassing the previous record disbursement of Sh88.8 billion set in May 2026.
The record monthly flow coincides with the continued recovery of private sector credit growth, which reached 10.6 percent in the same month, the highest level since February 2024.
Bank lending to businesses and households has been supported in part by lower borrowing costs, with loan rates continuing to drop despite a pause on cuts to the benchmark lending rate by CBK in February this year.
The average commercial bank loan interest rate fell to 14.4 percent in September from a peak of 17.2 percent in November last year, improving loan affordability to borrowers.
In contrast, absolute credit flows from commercial banks had turned negative in months coinciding with a contraction in lending, including January 2025 when absolute credit flows fell by Sh49.2 billion, the lowest level in the five-year cycle, while private sector credit growth was recorded at negative 2.9 percent.
“Growth in commercial banks’ lending to the private sector remained strong at 10.6 percent in September 2026 compared to 10.3 percent in August 2026 and a 2.9 percent contraction in January 2025,” CBK said last week.
“Growth in credit to key sectors of the economy, particularly trade, building and construction, agriculture, finance and insurance, and consumer durables remained strong, reflecting improved demand for credit.”
Credit expansion in the economy has coincided with a continued improvement in loan affordability as banks continue to cut borrowing costs even after CBK’s paused cuts to its benchmark rate.
Commercial banks have recently indicated that borrowing costs are likely to fall further in coming months, as the prevailing interest rate environment supports the room for additional cuts.
CBK’s most recent credit report to June 2026 highlighted underlying credit demand, especially for working capital requirements.
“The perceived demand for credit remained unchanged in economic sectors but increased in trade and personal and household sectors,” CBK said in the credit survey.
“The perceived increased demand for credit in the trade and personal and household sectors is mainly attributed to increased working capital requirements.”
The private sector credit growth recovery was preceded by significant cuts to the Central Bank Rate (CBR) as the benchmark fell to the current 8.75 percent from a high of 13 percent in August 2024.
The delayed recovery in lending, which is only showing momentum now, is attributable to a lag in monetary policy transmission.
Previously, credit growth to households and businesses had tightened as the CBK kept its benchmark rate elevated.
Last week, the CBK held its benchmark rate unchanged at 8.75 percent, indicating that it expected the policy rate to anchor inflation expectations and support economic growth, including the recovery of private sector credit growth.
The monetary authority has tied the strong growth in broad money supply (M3), which stood at 11.3 percent in September, to the improved growth of credit to the private sector.
The recovery in lending has also helped dilute the banking industry’s non-performing loans, which fell to a 44-month low of 13.9 percent in September 2026.
