Loans to shopkeepers, salaried workers, landlords and businesses in the manufacturing sector accounted for most of Kenya’s non-performing loans (NPLs) in 2025, according to the Central Bank of Kenya (CBK).
The CBK’s latest supervision report released on September 22 showed that the Personal and Household, Trade, Real Estate, and Manufacturing sectors accounted for 72.1% of all gross loans in the banking sector as of December 2025.
Together, the four sectors also accounted for 72.6% of the total value of non-performing loans, making them the largest contributors to bad loans during the year.
“The largest proportion of the banking industry’s gross loans and advances were channeled to the Personal and Household, Trade, Manufacturing and Real Estate sectors,” said the report.
“Trade, Real Estate, Manufacturing, and Personal and Household sectors accounted for the highest value of non-performing loans by registering 72.6%.”
CBK Reports That Trade Leads Bad Loans
The Trade sector, which includes shopkeepers, retailers and wholesalers, had the largest share of non-performing loans at Ksh170.56 billion, representing 24.5% of total NPLs.
Loans to salaried workers and other private borrowers under the Personal and Household sector amounted to Ksh114.05 billion, representing 16.4% of total NPLs.
Personal and Household loans also make up a large share of bank lending, accounting for 94.2% of all loan accounts in the country.
Meanwhile, Real Estate, which covers property developers and many landlords, recorded Ksh113.80 billion in non-performing loans, equivalent to 16.3% of the total.
Manufacturing followed with Ksh107.63 billion in bad loans, representing 15.4% of total NPLs.
Other sectors had smaller shares of the bad-loan portfolio, with Building and Construction at 7.4%, Transport and Communication at 7.6%, Agriculture at 5.5%, and Tourism at 3.3%.
The total value of non-performing loans stood at Ksh696.9 billion in December 2025, a slight decline from Ksh697.3 billion recorded a year earlier. NPL ratio also improved to 16.0% of gross loans, down from 17.1% in 2024.
CBK attributed the concentration of bad loans in the four leading sectors to a challenging business environment, which has affected borrowers’ ability to repay their loans.
The report points to pressure on households, small businesses and property-related businesses as some of the factors affecting loan repayment.
Also Read: CBK Proposes Powers to Restrict Expansion of Major Banks
Banking Sector Records Stronger Profits
Despite the high level of bad loans, Kenya’s banking sector recorded stronger financial performance in 2025.
Profit before tax increased by 17.7% to Ksh306.3 billion, up from Ksh260.3 billion in 2024.
Total net assets grew by 10.3% to Ksh8.35 trillion, while customer deposits increased by 11.6% to Ksh6.12 trillion.
The sector also remained above key regulatory requirements, with a capital adequacy ratio of 20.7% and an average liquidity ratio of 59.3%.
Also Read: CBK Reveals Kenyan Banks With Cheapest and Most Expensive Loans Right Now
CBK Changes Loan Pricing Rules
CBK also introduced a revised Risk-Based Credit Pricing Model in 2025, linking bank lending rates to the Kenya Shilling Overnight Interbank Average (KESONIA) and a bank-specific premium based on the borrower’s credit risk.
The new framework aims to make loan pricing more transparent and allow borrowers to compare loan offers more easily.
Banks were required to obtain board approval for their pricing frameworks by the end of 2025, with existing loans given a transition period that ended on February 28, 2026.
CBK said asset quality remains a key risk for the banking sector, particularly in the Personal and Household, Trade and Real Estate sectors, which continue to account for a large share of non-performing loans.
Follow our WhatsApp Channel and X Account for real-time news updates.
