Kenyan Banks Have Written Off $580 Million in Loans as Economy Slows

As Kenya’s economy slows to its weakest pace in five years, a mix of elevated living costs, tighter household budgets driven by new statutory deductions, and weakening demand across key sectors is continuing to erode borrowers’ repayment capacity, forcing listed banks to absorb hundreds of millions of dollars in loan write-offs as credit stress spreads from households into small and medium-sized enterprises and becomes increasingly visible in the banking system’s asset quality trends.

Banks listed on the Nairobi Securities Exchange wrote off $580 million in loans last year, underscoring continued strain on households and businesses as Kenya’s economy expanded at its slowest pace in five years, the Business Daily reported Wednesday.

The write-offs declined from about $680 million in the previous year, suggesting a modest improvement in asset quality, even as borrowers faced persistent pressure from high living costs, weak demand and tighter financial conditions.

Equity Group Holdings led the sector with write-offs rising to about $212 million from $172 million a year earlier, while KCB Group saw its write-offs fall to roughly $110 million from $197 million. As the country’s largest lenders, both remain most exposed to shifts in credit quality.

NCBA Group wrote off about $91 million in loans, up slightly from the previous year, while Absa Bank Kenya increased write-offs to about $83 million.

Diamond Trust Bank Group reduced write-offs to about $31 million, while Stanbic Holdings more than halved its figure to roughly $19 million.

Co-operative Bank of Kenya wrote off about $19 million, while Standard Chartered Bank Kenya recorded around $13 million. HF Group posted write-offs of about $380,000.

Households have faced weakening disposable incomes due to inflationary pressures and new statutory deductions for healthcare, housing and retirement savings. Businesses, particularly small and medium-sized enterprises, have also been squeezed by higher operating costs, including energy, financing and input prices, alongside softer consumer demand.

Kenya’s economy grew 4.6% in 2025, slightly slower than 4.7% a year earlier, marking its weakest expansion since the 0.3% contraction in 2020 during the Covid-19 shock. Agriculture, the largest sector, slowed to 2.8% from 4.3%, while manufacturing eased to 2.1% from 3.2%.

Equity Group said loans are written off once “all practical recovery efforts” have been exhausted.

“The group writes off a loan balance when the credit department determines that the loans are uncollectible,” Equity said in its annual report. “This determination is reached after considering information such as the occurrence of significant changes in the borrower’s financial position such that the borrower can no longer pay the obligation or that proceeds from collateral have failed to cover the entire facility outstanding.”

KCB Group said it writes off loans when borrowers lack sufficient assets or cash flows to repay outstanding obligations.

The Kenya Bankers Association has also proposed a 5% cut in PAYE tax across income bands to boost household purchasing power, arguing that real incomes have fallen by 10.7% to 12% over the past five years due to inflation and rising statutory deductions, including housing and social health levies.

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