Government Borrowing Limits Credit Access for Kenya’s Private Sector, Stakeholders Warn

Kenya’s private sector is increasingly struggling to secure credit as government borrowing from local banks intensifies, diverting funds away from businesses, industry players and lawmakers have said.

Forum Highlights Credit Squeeze

The issue was discussed at the inaugural Multisectoral Forum on Public Debt Management held on August 20, 2026. Convened by the National Assembly’s Committee on Public Debt and Privatisation and in partnership with the National Democratic Institute (NDI), the forum brought together Members of Parliament and private sector representatives to examine the impact of rising public debt on investment and economic growth.

Committee chair MP Abdi Shurie Mbalambala emphasised the importance of incorporating private sector feedback into national debt discussions, noting, “Your input will be highly appreciated and I’m sure it will go a long way in addressing the challenges we face in dealing with matters of public debt.”

Shift to Government Securities

The Kenya Bankers Association (KBA) revealed that banks are increasingly allocating funds to government securities due to attractive returns and lower risk, reducing the pool of credit available to private businesses.

Arnold, KBA’s Finance Manager, explained, “As government appetite for local borrowing goes up, then banks being businesses… you put your money there. We’ve seen a crowding out effect where banks then put most of their investments to government through purchase of government papers as compared to onward lending to the normal customer.”

Data presented showed a 58% rise in bank investments in government securities between June 2024 and May 2026, contrasted with only an 11% increase in lending to the private sector. Nearly 30% of total banking assets are now exposed to the government as a single borrower.

Manufacturing Sector Feels the Pinch

The Kenya Association of Manufacturers (KAM) linked restricted credit access to broader challenges in the manufacturing sector, which has seen its GDP contribution fall from 11.8% in 2011 to 7.1%.

KAM cited high production costs, energy prices, and financing difficulties as key obstacles hindering manufacturing growth.

The Kenya Private Sector Alliance (KEPSA) urged increased use of Public-Private Partnerships and called for a stable tax environment to promote investment and business expansion.

Calls for Greater Debt Transparency

Participants also stressed the need for improved transparency in public debt management. Kinangop MP Zachary Kwenya advocated for automating the Public Debt Management Office to make debt data easily accessible.

He remarked, “It is really concerning when as a country we have to form a committee to track our debt, you just need to have a website where you click on it [and] you see the public debt.”

The forum will continue to explore strategies for managing debt, enhancing private sector financing, and fostering economic growth and job creation.