Thousands of borrowers in Kenya’s trade sector are struggling to repay their bank loans, with the latest statistics from the Central Bank showing that this segment now accounts for KSh170.6 billion or a quarter of all non-performing loans.

Together with manufacturing, real estate, personal and households, borrowers in these four sectors of the economy now account for KSh506 billion in bad debt or 72.6 percent of all non-performing loans (NPLs) in the country’s banking industry.

According to CBK’s bank supervision annual report for the 12 months ended December 2025, trade alone carries KSh170.6 billion in bad loans, which is about a quarter or 24.5 percent of the total NPL portfolio in the industry. 

Borrowers in real estate segment follow closely at KSh113.8 billion or 16.3 percent of bad loans in the industry. Manufacturers are also facing it rough, accounting for KSh107.6 billion or 15.4 percent of NPLs mount.

Millions of individuals who accessed loans for personal use have also fallen short of monthly repayments, amassing KSh114 billion in non-performing loans in the year to December 2025. This represents 16.4 percent of NPLs in the industry.

The 2025 report however shows the banking industry is experiencing some relief as the tide of bad loans contracted marginally by 0.1 percent to KSh696.9 billion compared to KSh607.3 billion reported in 2024. 

At the same time, the ratio of gross NPLs to gross loans improved, falling to 16 percent from 17.1 percent attributable to a 6.8 percent growth in credit uptake to KSh4.35 trillion during the year under focus.

The banking sector regulator also attributed the marginal decline to “repayments, recoveries and increased new advances.”

These statistics imply that players in the four sectors of trade, real estate, manufacturing and personal and households are struggling to realise meaningful incomes to service their credit obligations with lenders.

CBK data represents stressed shopkeepers, stalled property developments, factories operating below capacity and households that are increasingly getting squeezed by the cost of living. 

The apex bank said it will “closely monitor” these four sectors, urging banks to make adequate provisions for loan losses. 

Perhaps the most alarming detail in the report is the 22.8 percent increase in loans classified as “loss,” the worst category, reserved for facilities overdue by 360 days or more. These rose from KSh189.2 billion to KSh 232.3 billion as of December last year. 

Meanwhile, CBK report shows that the ‘Watch’, ‘Substandard’, and ‘Doubtful’ loan categories in the banking sector contracted, suggesting that while some borrowers are recovering, others are sliding irreversibly into default.

The ‘Normal’ category grew by 10.2 percent, now accounting for 74.7 percent of all loans, up from 72.4 percent in 2024.

Mortgage stress

Non-performing mortgages in the market increased to KSh 50.2 billion in December 2025 up from KSh 46.0 billion a year earlier. The sector’s NPL ratio for mortgages stood at 16.3 percent, slightly above the industry average. 

Banks surveyed by the CBK cited low income levels, high cost of property and limited access to affordable long-term finance as the top obstacles to mortgage market growth. 

Overall, the lenders increased provisions for loan losses to KSh 339.3 billion, up 7.7 percent, while net non-performing loans fell by 13.7 percent to KSh 231.7 billion. 

CBK noted that the country’s banking sector remains exposed to a fragile global environment, persistent geopolitical tensions worsened by the conflict in the Middle East and domestic economic pressures just a year to the General Election.

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