Kenyan commercial banks earned an additional Ksh.13 billion in interest from small and medium enterprises (SMEs) in the year ending March 2025, driven by high interest rates.
The Central Bank of Kenya (CBK) raised its benchmark rate to 13% in February 2024, pushing average lending rates to SMEs to 17.95% by March 2025, up from 16.18% the previous year.
This followed a period of monetary tightening to curb inflation, which hit 6.9% in December 2024.
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SMEs, contributing over 40% to Kenya’s GDP, faced increased borrowing costs, with microfinance banks charging up to 27% and some rates reaching 32%.
Despite higher rates, SME loan uptake grew, with outstanding loans rising 8.5% to Ksh.844.7 billion.
However, high rates have raised concerns about potential defaults and economic strain on SMEs, prompting calls for more balanced monetary policies to support this critical sector.
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