Banks resumed bigger credit disbursements to households in the opening months of 2026, after last year’s rare retreat from consumer lending, spurred by falling borrowing costs and a renewed appetite to grow their retail loan books.
Data by the Central Bank of Kenya (CBK) shows that outstanding loans to households by commercial banks rose to a record Sh596.6 billion in April from Sh558.3 billion a year earlier.
The Sh38.3 billion increase represents annual growth of 6.86 percent, reversing the 1.6 percent contraction recorded in April 2025—the first decline in household credit in years.
The turnaround comes after a year that banking executives said was marked by caution rather than expansion.
“It [2025] was a defensive year; it was not a growth year. It was about optimisation,” Equity Group chief executive James Mwangi said in March, referring to the lender’s 2025 strategy as banks tightened credit amid concerns over borrowers’ repayment capacity and a high interest rate environment.
Mr Mwangi said the strategy for the bank, where consumer and personal loans account for roughly a fifth of the total credit portfolio, has since shifted this year, adding: “Loans have now started to pick up and going forward it is offensive, it is growth of loan book.”
His remarks mirror CBK data showing banks created a net Sh12.5 billion in new household loans during the first four months of this year, reversing a Sh14 billion contraction over the same period in 2025 when repayments and loan write-offs exceeded fresh lending.
The recovery has partly been helped by easing borrowing costs.
Commercial banks’ weighted average lending rate has fallen steadily from a peak of 17.22 percent in November 2024 to 14.64 percent in April this year, cutting the cost of credit by 2.58 percentage points as the CBK unwound part of its monetary tightening cycle.
The lower rates have encouraged lenders to rebuild consumer loan books, which are among the most profitable and important segments of retail banking.
Consumer lending also matters because it fuels household spending, financing purchases ranging from school fees and medical bills to household goods, vehicles and home improvements.
The recovery in household credit was yet to translate into a broad-based rebound in consumer spending as of April.
Stanbic Bank’s Purchasing Managers’ Index (PMI) showed businesses reported only modest growth in new orders during the first four months of the year as households remained constrained by tight budgets.
By March and April, many firms said customers were cutting spending amid financial pressures and higher fuel prices linked to the Middle East conflict, although the decline in demand had begun to ease.
The personal and household lending segment is the single largest category of lending for many Kenyan banks, underlining its importance to both bank earnings and economic activity.
“Personal and household lending continues to be our single largest sector within the bank at 29.6 percent of the loan book. That’s where we have our check-offs, scheme loans with various universities and institutions,” KCB Group chief financial officer Lawrence Kimathi said in March.
Across the banking industry, loans to private households account for roughly a third of total lending, making banks’ appetite for consumer credit a key determinant of household spending and economic growth.
The latest CBK figures suggest lenders are becoming more willing to finance households again after last year’s retrenchment.
Despite the rebound, banks have yet to return to the pace of lending seen before borrowing costs surged.
Net household lending reached Sh43.3 billion in the first four months of 2024 before swinging to a Sh14 billion contraction in the same period of 2025. This year’s Sh12.5 billion increase marks a recovery, but remains less than one-third of the lending recorded during the 2024 boom.
The slower pace suggests banks are reopening the credit taps gradually, balancing growth ambitions with caution over asset quality as households continue to navigate the lingering effects of higher taxes and elevated living costs.
