The Central Bank of Kenya (CBK) is piloting instant payments to government suppliers through the instant bank-to-bank transfers platform PesaLink in a bid to accelerate settlements to businesses.
Once fully rolled out, the move would bring relief to thousands of government suppliers who until now wait on payments through slower bank transfer processes.
National government pending bills climbed to Sh526 billion in June 2025 from Sh421.6 billion in March 2025, as per data from the National Treasury.
‘PesaLink is involved in a pilot project with the CBK for government supplier payments,’ CBK noted in disclosures made in the State of Inclusive Instant Payment Systems in Africa report.
‘The pilot for supplier payments has completed all user acceptance tests and has been signed off, with the go-live on the horizon.’
The pilot has allowed suppliers to choose the accounts or wallets to receive the funds, while participating banks and mobile money service provider T-Kash (operated by Telkom Kenya) -have been responsible for contacting PesaLink to investigate transaction statuses if a supplier does not receive their funds.
PesaLink is a round the clock real-time digital payment solution allowing instant bank-to-bank transfers at a low cost.
The system is owned by local banks through their stake in the Integrated Payment Systems Limited which is PesaLink’s registered business/legal name.
The move to foster instant payments to government suppliers is part of a wider goal to expand government to person payments ,which have not been a prominent use case for PesaLink.
This is despite government institutions including State-owned enterprises and ministries, holding their funds in accounts at the CBK which connects directly to PesaLink as a participant in the ecosystem.
CBK acts in a similar capacity to a commercial bank by providing channels and a portal to various ministries and State-owned enterprises to disburse funds.
Ministries and State Departments enter beneficiary details, which are validated using a PesaLink API before the funds are debited and the payment instructions sent.
Additional plans
PesaLink aims to significantly reduce costs to the government for social benefit payments and provide an alternative to banks which require beneficiaries to have an account whose tiered pricing models are potentially expensive.
Counties already use PesaLink to disburse social welfare payments.
CBK has indicated additional plans to expand the use of PesaLink to include the settlement of salaries and pensions.
‘There are also plans to expand the service to include government pension and salary payments,’ CBK indicated.
‘Upon initiation, transactions are typically executed instantly, reaching beneficiary accounts in seconds. Although funds are credited immediately, movement and settlement of funds between participating financial institutions occur later, via a net settlement file prepared by PesaLink and handled by a central settlement system which is oversighted by the Kenya Bankers Association.’
The Kenya Kwanza administration has mulled securitising some of the State’s pending bills, to clear arrears to the government suppliers beginning with road suppliers.
The government has begun settling the arrears using a Sh04 billion syndicated loan from commercial banks, allowing road contractors to resume abandoned projects ahead of the issuance of two roads bonds totalling Sh300 billion.
Investors in the bonds are to be compensated using partial collections from the road maintenance levy fund, which have been set at Sh12 per litre from the sale of petrol and diesel.