Most Kenyan firms relied on internally generated funds as their primary source of financing in September 2025, according to the Central Bank of Kenya’s CEOs Survey. The shift away from bank loans was attributed to high borrowing costs, cautious lending by banks, and strict collateral requirements that limited access to credit, officials said.
The Central Bank of Kenya’s (CBK) September 2025 CEOs Survey found that most firms in the country prioritized internally generated funds over bank loans as their main source of financing, despite some easing of lending rates since August 2024. The survey attributed this shift to high borrowing costs, cautious lending by banks, strict collateral requirements, and lengthy loan approval processes, which especially limited access for small and medium-sized enterprises (SMEs), officials said.
As of March 2025, 55% of companies relied on their own resources for financing, while only 30% depended on bank loans.
Data cited from a CBK-linked report in April 2025 showed that as of March 2025, 55% of companies relied on their own resources for financing, while only 30% depended on bank loans. The report noted that firms typically used multiple sources of funding, but internal funds and bank loans remained dominant, with internal funds taking precedence due to elevated borrowing costs. Similarly, a CBK-referenced survey covering July 2025 to May 2026 observed a decline in the share of funding from bank loans from 40.1% to 24.1%, while internally generated funds consistently accounted for about half of total financing. This underscored a structural tilt toward cash funding, according to the survey.
Despite CBK’s monetary policy easing that began in August 2024, lending rates remained high, with the January 2026 Market Perceptions Survey reporting an average lending rate of 14.81%. Subsequent data showed rates of approximately 14.5% in May 2026 and 14.38% in June 2026. These figures indicate that commercial lending costs stayed in the mid-teens range through mid-2026, officials said. The May 2026 survey found that while 62.5% of respondents reported declining lending rates, 21.9% said their borrowing costs had actually risen, suggesting uneven transmission of monetary easing to actual loan pricing.
The September 2025 CEOs Survey linked firms’ preference for internal funds to cautious lending behavior by banks, which imposed strict collateral demands and prolonged loan approval timelines. These factors, combined with high credit costs, particularly excluded SMEs from accessing bank credit, officials noted. CBK’s credit survey for the quarter ending June 2025 showed a high share of bank respondents citing tight credit standards and heightened credit risk, reflecting a risk-averse stance even as policy rates began to fall.
Further analysis from CBK in April 2025 indicated that elevated lending rates made borrowing more expensive, with some companies explicitly citing high interest rates as a key barrier to accessing credit facilities. CBK’s October 2024 perception survey on risk-based lending reported that shifts to risk-based pricing and earlier CBK interventions had contributed to high loan pricing, slowing the uptake of new credit. The survey also noted that 75% of respondents observed corporates adopting a “wait-and-see” approach to new borrowing due to the relatively high cost of credit, reinforcing firms’ decisions to rely more on cash and internal resources.
Business behavior also reflected a preference for self-financing. The May 2026 business-focused survey cited by Kenyan Wall Street reported that reliance on internally generated funds remained around 50% of total financing, while bank loans steadily declined as a funding option. The February 2024 Business Daily article, drawing on CBK data, noted that higher interest rates encouraged firms to cut costs or save rather than invest or hire, indicating a broader shift toward liquidity preservation.
Although CBK’s Market Perceptions Surveys in January and March 2026 projected higher private sector credit growth due to anticipated lower lending rates and improved transmission via the KESONIA framework, firm-level data showed continued strong reliance on internal funds. A February 2026 Business Daily report, citing CBK, stated that banks expected moderate to high credit demand in early 2026 driven by lending rate reductions and post-holiday restocking, yet actual firm-level financing behavior remained conservative.
The broader macroeconomic environment also influenced firms’ financing choices. A February 2024 CBK survey found that 40% of companies feared worsening business conditions due to higher taxes, regulatory levies, and slow consumer demand, prompting a focus on cash flow and liquidity. The same survey showed that 55% of respondents expected high inflation to lead to tighter monetary policy and higher interest rates, which they believed would dampen growth. Firms cited challenges such as high cost of living, a weak shilling, low economic activity, high taxation, fuel prices, poor cash flow, and rising production costs as factors increasing the need for liquidity buffers and discouraging additional borrowing.
CBK’s March 2026 Market Perceptions Survey reported expectations of improved economic activity in the second quarter of 2026 due to increased agricultural output and lower credit costs, but this outlook was tempered by the legacy of previously elevated loan costs and tightened lending conditions. Across surveys conducted from 2024 through mid-2026, CBK data consistently linked elevated lending rates, tighter credit standards, and macroeconomic uncertainty to firms’ preference for cash and internally generated funds over expanded borrowing.
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