Category: Business Daily

Kenya has become masterful at celebrating MSME resilience. Our media are awash with stories of MSME owners rising above their challenges to succeed.

Small wonder, considering small businesses are the backbone of our economy, yet so many of them face nearly insurmountable barriers to their success.

The Kenya National Bureau of Statistics estimates that there are 7.4 million MSMEs operating across the country employing roughly 14.4 million people. That is a significant number of livelihoods that hinge on the success of these small businesses.

Yet, one in five of these businesses will fail within their first year, and only one in three survive beyond their tenth birthday.

We should be asking how we can fix them. Systemic interventions removing the barriers to business can have significant impact on economies.

Changing systems means critically reviewing what we have been doing and fundamentally altering how different parts of the environment interact. It is about reworking the business ecosystems to ensure that more MSMEs not only survive but thrive.

Consider the financing deficit for Kenyan MSMEs, for example. A World Bank report indicates that there is a gap in excess of Sh2.6 trillion.

This is despite the Sh50 billion MSME support pledged by the Kenya Bankers’ Association. While significant, it is a drop in the ocean of MSME financing needs.

On the other hand, there are more than 45 million active mobile money accounts, indicating fertile ground for the growth of devolved finance backed by a robust digital banking system.

Yet, only a few players have recognised this market gap, and even fewer are practicing transparent and fair access to financing for MSMEs. Instead, the digital credit space is littered with predatory lending practices and unsustainable interest rates.

This unfortunate situation highlights a disconnect between parts of the ecosystem that could help address a major challenge.

Development and overhauling of business ecosystems may seem expansive or complex, but the potential returns outweigh any perceived costs. Instead of an endless cycle of training programs, loan funds, and limited incubators, an ecosystems approach has the opportunity to completely change how MSMEs operate and thrive in the country.

MSMEs have proven their resilience a thousand times over. Now it is time we built an ecosystem to support the great entrepreneurs.

The same pattern emerges in market access. A 2024 Geo Poll survey of MSME owners found that at least 24.68% them were actively pursuing market opportunities within the Africa Continental Free Trade Area (AfCFTA), yet the main challenge they face is a lack of market information.

In the case of government procurement, a significant driver of business in the country, there are systemic issues including unpaid bills, opaque procurement processes, and other structural challenges that make it impossible for MSMEs with tight balance sheets to compete.

Furthermore, firms with superior bargaining power delay payments, impose unfair contract terms, and transfer costs to small suppliers.

These challenges represent a systemic extraction that no amount of training or individual brilliance on the part of the business owner can overcome.

There are similar issues that present when looking at licensing. Out of the 7.4 million MSMEs in the country, only 1.6 million are fully licensed, leaving 5.8 million that operate in grey area.

One of the key barriers to licensing and registration is the complex and multi-step registration framework. Simplifying it requires careful review of the process, with an ecosystem-wide look at each government function required for full registration.

Unfortunately, the most innovative MSME support initiatives in Kenya are mostly fragmented. They might help a business access financing, but not support market access, so the credit goes to waste as dead stock or loan repayments. Some businesses are assisted with training, but not the capacity and technology to scale.

Conversations such as those that will be held at the second Business Ecosystems Summit in Kisumu on 26-28 November will bring together multiple players to chart a way forward in delivering ecosystems change for the benefit of Kenyan MSMEs.

MSMEs, the quiet giant of Kenya’s economy, have proven their resilience a thousand times over. Now it is time we built an ecosystem to support the great entrepreneurs.

Across Africa, women are the engines of growth, resilience, and innovation.

They make up 58 percent of the self-employed workforce, dominate the small and medium-sized enterprise (SME) space, and reinvest more in their families and communities than any other demographic. Yet, they remain systematically excluded from the financial systems that should be empowering them.

This is not just a gender gap – it is a market failure. The $1.7 trillion financing gap for women-owned businesses is not merely a missed opportunity for women across the world, it is a structural failure that not only limits women’s economic potential, but also undermines the continent’s ability to unlock inclusive, sustainable growth.

Across African markets, the evidence is consistent: women repay their loans more reliably, build resilient businesses, and drive household stability. And yet, they are still perceived as high-risk borrowers. Why?

Because the financial systems we inherited – and in many cases, have failed to reform – were never designed for women. Collateral-based lending models persist, even as we know that African women are significantly less likely to own titled assets due to legal, cultural, and historical barriers.

Financial literacy programmes often overlook the fact that many African women already manage complex household and informal economies with discipline and foresight. And while the future of finance is digital, a persistent gender gap in digital access continues to exclude millions from mobile banking, digital wallets, and mobile credit.

These issues are not theoretical. They are lived daily by women across our continent. From the Burundian woman rebuilding her life through micro-savings, to the Ghanaian entrepreneur whose dreams are stifled by fear of credit, to millions of women locked out of digital finance due to lack of access or digital literacy – these stories reflect a system that was not designed with women in mind.

Yet, we continue to make the same choices: treating women as a niche market, allowing financial illiteracy to persist, and building systems that penalise instead of empowering women in business.

These are not inevitable outcomes. They are policy and design choices. And choices can – and must – change.

The economic case is irrefutable. Studies show that women reinvest up to 90 percent of their income into their families and communities – multiplying the social and economic impact. Women-led businesses deliver stronger returns.

Economies with higher gender parity in finance are more resilient. Financial inclusion is sound economic policy.

However, the question is no longer whether women deserve access to finance. The question is: Are we bold enough to reimagine Africa’s financial systems so they work for women – and are powered by them?

The answer to that question lies in moving beyond microfinance and into long-term, scale-up capital. It means designing financial products around the needs of cross-border traders, agri-entrepreneurs, and informal sector leaders – many of whom are women.

It also means redesigning Africa’s financial architecture with intentionality; Gender-intelligent lending models that rely on cash flow and business data – not just collateral. It means creating digital solutions that close the access gap by providing women with safe, convenient, and secure financial tools.

It is time to scale up impact investments and blended finance that de-risk capital for women-led ventures. Pan-African partnerships that harmonise regulatory and financial frameworks to make cross-border trade more accessible for women-owned businesses are also critical to driving change for women entrepreneurs.

We must move women from the margins of the financial system to its very engine – from borrowers to investors, from financial literacy to financial mastery.

Women do not need to be fit into outdated financial models – they need financial ecosystems built for them. Ecosystems that reflect their realities, harness their entrepreneurial ambition, and help them build wealth.

We must stop treating women as a niche market and recognise them as a $5 trillion global opportunity, with Africa as one of the most dynamic frontiers for gender-smart finance.

As a leader in Africa’s financial sector, I offer this challenge to banks and financial institutions: Stop treating women as a fringe demographic. They are a $5 trillion opportunity hiding in plain sight.

To policymakers, move beyond neutral language and legislate financial inclusion with intention, data, and urgency. To investors, back women boldly-not out of charity, but because it’s good business. And to women, Own your financial power. Demand more. Borrow to grow. Invest to lead. You are not just part of the financial future-you are the future.

At the core of this discussion is a simple but radical idea: Her Money. Her Power. It is not just a slogan; it is an economic transformation waiting to unfold. It is a mindset.

It is a commitment to building a financial system where women are not only served-but are central. Because when women control their money, they control their future. And when that happens, communities thrive, economies grow, and the continent rises.

The goal is not to simply invite women into the financial system-it is to rebuild that system with women at the centre. The future of finance in Africa will be inclusive, digital, and woman-centered-or it will fall short of its promise.

For thousands of Kenyan smallholder farmers, macadamia offers a growing opportunity, a high-value crop with the potential to positively impact rural livelihoods.

Kenya already ranks among the world’s top three macadamia producers, and as global demand for these ‘green gold’ nuts continues to rise, we are well-positioned to cement our place as a leading global supplier.

Growing health and lifestyle trends are driving consumers toward nutrient-rich, plant-based snacks and nuts like macadamia are increasingly viewed as a premium source of healthy fats and protein.

At the same time, its use as a high-value ingredient in confectionery, bakery, and luxury food products continues to keep global prices strong.

However, to seize this opportunity, more needs to be done to address the key challenges affecting farmers.

Pest infestations continue to affect nut quality and reduce farmer earnings, while gaps in market regulation hinder the ability to maximise local value addition. With stronger collaboration, targeted investments, and effective enforcement of existing policies, Kenya can enhance its position in global markets and ensure that farmers reap the full benefits of their hard work.

Pest losses threaten farmers’ earnings but solutions exist. Recent data from Tupande reveals that in the 2024 long rains season, an alarming 17.3 percent of macadamia harvests were lost to pest and insect infestation.

That is nearly one in five nuts. Although interventions helped reduce losses to nine perceent in 2025, industry-wide infestation remains as high as 30 percent, according to estimates from 2024.

The cost is steep: farmers can lose up to 406 kilogrammes per season due to downgraded nut quality, translating to over Sh40,000 in lost income per farmer at current farmgate prices. Yet, we have seen what works. Integrated Pest Management (IPM) that teaches farmers to combine biological control, field hygiene and monitoring, has shown positive outcomes in reducing infestation rates.

When Kenya introduced the ban on in-shell macadamia exports in 2009, the goal was to empower farmers by promoting local processing, value addition, and job creation. This policy helped spur the growth of domestic processing facilities, expanding income opportunities for farmers and businesses alike.

However, there is still room to strengthen enforcement and close regulatory gaps. The current framework implemented through a ministerial directive has served the country well but can sometimes vary with changes in administration.

A permanent legislative framework enacted through Parliament would provide long-term stability, ensuring that all macadamia exports from Kenya are fully processed locally, regardless of who holds office.

When in-shell nuts are exported raw, they are often processed abroad, shelled, roasted, and resold at significantly higher prices in global markets such as the EU and Germany.

As a result, Kenya misses out on critical value-added benefits, including jobs, tax revenue, and export earnings.

Moreover, inconsistent nut quality from informal sourcing channels can affect Kenya’s global reputation, with some buyers perceiving Kenyan macadamia as less reliable than competitors such as South Africa or Australia.

The 2009 restriction on in-shell exports played a key role in expanding our network of macadamia processors, creating a solid foundation for domestic value addition and export growth.

Today, with increasing global demand, there is a timely opportunity to build on that momentum. This means strengthening linkages between farmers and processors, from supporting consistent quality standards and expanding extension services at the farm level to improving access to market information and capacity building for processors.

Encouragingly, the MACNUT Association of Kenya is already leading efforts to harmonise standards and enhance coordination within the industry. Their ongoing work to align market practices and promote fair, transparent engagement across the value chain is helping to build confidence among farmers, processors, and buyers alike.

Farmers want to grow high-quality macadamia nuts and earn a fair price for their hard work. Achieving this means tackling the challenges that matter most: effective pest control, access to quality seedlings, practical training, and reliable markets that reward their efforts.

Each actor in the value chain has a role to play. For processors, true partnership with farmers goes beyond price, it’s about trust, faster payments, and quality incentives that keep farmers motivated. When farmers earn more, processors benefit too. Government support is equally vital.

A lasting legislative framework for macadamia, alongside investment in extension services and rural infrastructure, will provide farmers and processors with the stability and confidence to grow the sector. At the same time, collaboration among government, industry associations, researchers, and development partners is also essential.

Joint efforts to develop pest-resistant, high-yielding varieties, combined with farmer training and stronger market linkages, can raise productivity, increase incomes, and strengthen rural and national economies, ensuring prosperity is shared from the farm up.

Standard Chartered Bank of Kenya has reported a 38.2 percent drop in net profit for the nine months ended September, while disclosing the Sh7.2 billion cost of settling the pension claim awarded by the Supreme Court to its former employees.

The bank reported a net profit of Sh9.7 billion, down from Sh15.8 billion over a similar period last year, attributable to a Sh2.7 billion one-off cost included in staff expenses for making partial payment towards the court settlement.

StanChart disclosed that it had set aside a cumulative Sh2 billion fund during the 16-year lawsuit to correct erroneous pension calculations for appellants.

This means the bank increased its staff pensions kitty by Sh4.7 billion to pay the 629 former employees, and has also started to make payments of an additional Sh2.5 billion awarded to the appellants.

The total payout to the appellants will therefore be Sh7.2 billion.

‘We have delivered a resilient performance in the third quarter with profit before tax of Sh13.2 billion, a 41 percent drop year-on-year on account of revenue reduction and a one-off employee past service cost of Sh2.7 billion, following the Supreme Court ruling on 5 September 2025 and the Retirement Benefits Appeal Tribunal (RBAT) orders,’ said StanChart’s chief executive officer Kariuki Ngari.

‘I am pleased to inform our stakeholders that we have substantively discharged the orders issued by the Retirement Benefits Authority Tribunal,’ he added.

He revealed that, by the end of last week, the bank had discharged Sh1.9 billion out of the Sh2.5 billion awarded to the appellants, following the completion of the verification process.

The sum was paid to 499 of the 629 appellants, indicating an average payout of Sh3.8 million.

The bank did not categorise the one-off payout as an exceptional item, but loaded it on staff costs, which jumped 32 percent to Sh9.1 billion from Sh6.9 billion a similar period last year.

StanChart also felt the pinch from declining interest income from customer loans and lending to other banks, and forex earnings also took a dip.

Interest income from loans fell by 21.3 percent to Sh13.6 billion due to a decline in its loan book accompanied by fall in interest rates.

StanChart’s loan book stood at Sh146.3 billion as at September 2025, down from Sh151.2 billion a year earlier.

Interest income from other lending to other banks fell by Sh2.25 billion, or 44.5 percent, to Sh2.8 billion as high liquidity in the banking sector dampened interbank borrowing.

StanChart’s earnings from forex trading fell by 58.9 percent to Sh2.7 billion from Sh6.6 billion, as a stable shilling denied the bank spreads to capitalise on.

Meanwhile, earnings from lending to the government rose by 30.4 percent to Sh8.7 billion, following increased investment in Treasury bills and bonds as private sector lending lagged.

Interest expenses fell by 32 percent to Sh2.8 billion, attributable to lower interest rate paid on customer deposits, which remained flat at Sh283.4 billion.

In September, StanChart issued a profit warning, signalling that it expects its net profit for the full year ending December 2025 to fall by at least 25 per cent, or Sh5 billion.

September 2020 should have been one of the happiest seasons of Mary Abour’s life. After five arduous years navigating through an electrical engineering course, she was set to graduate.

‘I’d actually rented the gown to go for a photo-shoot, but there was no place open at the time,’ she recalls.

She should have been with her colleagues on graduation square at the University of Nairobi standing to attention when her name rang from the sound system. She should have been doing the tassel turn on her graduation cap at the climax of the ceremony but she was at home worried stiff like the rest of the world.

The ceremony was transmitted live via video link, among the first virtual graduation ceremonies in Kenya. ‘I don’t even remember the graduation, to be honest. I didn’t even watch it online!’ Ms Abour confesses.

Wanjiku Kangangi was going through the same fate elsewhere.

A few short years on, Ms Abuor and Ms Kangangi are now part of a growing force of female talent in engineering and have long put behind them the tragic times that launched them into the professional realm in a male dominated field.

Engineering 101

For Shirley Muhati, medical school was the natural choice. Her elder brother had preceded her there, and she was gingerly following in his slipstream to pick up the scalpel as well.

‘We were made to believe they make a lot of money,’ Ms Muhati speaks of her childhood ambitions of being a doctor. When her brother came home with tales from anatomy class, however, she knew this wouldn’t be for her. Engineering became what she finally settled on.

Gloria Mbula was, in her mind, headed all the way to law school.

‘Everyone would tell me I would make a good lawyer because I liked debating, arguing. I was always the loudest kid in the group,’ she says. To this day, she’s still a seasoned storyteller.

This dream, however quickly faded as she discovered and fell in love with physics in high school, taking her to the School of Engineering at Jomo Kenyatta University of Science and Technology.

From familial guidance, or in Ms Muhati’s case, the apparent guarantee of getting scouted by the biggest companies while still in university, for these ladies, the pull toward a career in engineering was one they couldn’t resist.

Ms Mbula relays that her class had 15 women, a massive improvement on the class ahead of hers that had only two. Ms Muhati’s class at Moi University had 10 women, a fifth of the class.

The transition

Ms Mbula heard from a cousin that first class honours students got scholarships to study their Masters at the same institution, accompanied by a tutorial fellowship.

‘This is a hack to getting a job and getting a scholarship, I told myself. I was going to go get a first class honours!’ She did just that but opted out of teaching at her alma mater.

When she joined Isuzu East Africa in 2019, the training in class didn’t quite convert to the ground. T-squares and other draughtsman equipment for illustration used at school were replaced by software which took some getting used to.

For Ms Muhati, the industry can collaborate with universities to build what she refers to as an employee transitioning from student in plug and play mode.

‘I would propose some of the projects [being] run in the universities be real life examples in industries so that people get to appreciate what challenges to expect even before coming to the industry,’ she advices.

‘When there are new concepts, they add them to the course, but they don’t remove the old ones,’ Ms Abuor laments, speaking of students having to contend with 80 units in an already challenging curriculum.

Proof and prejudice

These women speak of very little discrimination, if any, or of having to prove their mettle before being accepted by their peers at school and later in the corporate world. Ms Mbula swears that sometimes she even forgets her gender, speaking to the inclusion and support she receives on her mechanical engineering role in the automotive industry in Nairobi.

Sometimes, the prejudices are societally-imposed, as Ms Abuor explains.

‘The feeling of proving yourself is innate. It’s in me. I can’t get rid of it. So I don’t know if it’s a ‘me’ feeling or if it’s universally experienced by women, but that feeling is always there!’

As a trained electrical engineer working in the telecommunication industry, Ms Abuor recalls once deploying 15 services in a span of three months when she’d only been called on to do one!

Ms Kangangi however recalls a specific event that played out on her first day at university. She entered the massive lecture hall and sat down for her first ever class on campus. ‘A guy approached me and said, ‘Hi, how are you doing? Do you know this is an engineering class?” she recalls.

She was slightly taken aback but quickly regained her composure with a retort that she knew full well where she was and was studying electrical engineering.

Other than that, she didn’t have any problems. Ms Kangangi has segued slightly and is today leading a team of seven other software engineers at Ketha Africa, an agricultural start-up looking to digitise the agricultural ecosystem for small-scale farmers in Kenya.

Generation next

Ms Muhati is a member of the female committee for engineers at the Institution of Engineers of Kenya, where on top of dealing with issues unique to women in her profession, one of their other roles is trying to build up the number of women in her profession. According to her, women number a quarter of the total number of registered and certified engineers.

At Isuzu East Africa where she works as a chemical engineer in the paint-shop, she speaks of their mentorship programme.

‘We’ve partnered with Embakasi Girls. Every month, we run a ten-week mentorship session for Form 2 [students]. Part of what we try to do is just to inspire [the girls] that it’s possible to go through with their studies, to do sciences, to be an engineer,’ she says.

Ms Abuor’s contribution, on top of her duties is being a peer-buddy to newly recruited staff at Safaricom. ‘I’m proud of them,’ she beams while speaking of the two young ladies whose hands she’s held, easing their transition into the fast-lane.

Down to business

Today, Ms Kangangi speaks with enormous pride about the work she does. ‘It is very fulfilling. I wrote the first line of code and to see how it has transformed lives, that was very fulfilling for me. It gets real,’ she says of experiences when she goes from the back-end, as they call it in the trade, to meeting her human clients.

As a value-added service engineer, Ms Abuor says she couldn’t and wouldn’t have it any other way. Her work drives millions of transactions and conversations daily and she’s gotten so immersed in it that she gave up her passion to play music, something she thinks she should return to on top of the nature walks she takes these days.

Asked about her future, Ms Mbula goes back to people. ‘I see myself managing larger teams, having a larger scope. It may or may not be in engineering,’ she says.

Given her people skills – she manages a team of 28- this seems like a natural path down the road for her.

Ms Muhati sums up an engineer as a problem solver. As process engineer for the paint-shop on the production floor, she feels most at home with boilers and ovens.

Consolidated Bank of Kenya shook off boardroom wrangles to continue with its financial turnaround reporting a Sh80.2 million profit for the nine months ended September 2025.

The government-owned bank, which currently lacks both a substantive board of directors or chief executive, rode on interest earnings from Treasury bills and bonds to reverse a Sh131.9 million net loss reported in the same period a year earlier.

After more than a decade of loss-making, which eroded its capital levels to below regulatory requirements, the bank returned to profitability in the six months to June this year.

However, in October, the bank failed to renew the contract of the Sam Muturi, the CEO who turned it around, and is yet to appoint a substantive replacement.

The National Treasury, which owns 93.5 percent of Consolidated Bank, appointed Dr Dominic Njeru, a lecturer at the University of Nairobi, on an interim basis. Dr Njeru’s appointment has, however, been stalled by the Central Bank of Kenya (CBK) as he is yet to receive the regulator’s nod on fit and proper test.

Notably, the bank’s financial statements were signed by the sole remaining board member, Florence Oluoch, with no executives present.

More than half of the bank’s top management – six out of eleven – are serving in an acting capacity, which denies them full authority to execute their roles.

‘The performance was driven by 27 percent growth in [net interest income] from Sh711 million to Sh903 million. A rise in interest income from government securities to Sh583 million from Sh278 million and a decline in interest expense by nine percent to Sh581 million drove up the interest income,’ said the bank’s acting head of finance, Fred Ronoh.

Consolidated Bank held Sh8 billion in government securities up from Sh4.6 billion a year earlier. The bank’s loan book shrunk 2.3 percent to Sh8.2 billion as banks took a more cautious approach to lending in a tough economy where defaults have been growing.

Consolidated bank’s borrowings from CBK nearly doubled at Sh5.8 billion up from Sh3 billion, signalling increased reliance on regulator funds to conduct business.

The bank is still optimistic that the government will inject additional capital to make it compliant to regulatory requirements and give it space to grow its business.

‘The bank is well positioned for. continued focus on customer needs even as the shareholders remain committed to support and ensure that the bank is adequately capitalised to meet minimum regulatory requirements,’ said Mr Ronoh.

Consolidated Bank has been waiting on the Treasury to inject cash for over a decade, forcing it to rely on cost cutting to stay afloat rather than business growth.

The value of Kenya’s unroasted coffee exports jumped 38.6 percent to Sh43.4 billion in the nine months to September, signalling a price-driven boom that strengthened the sector’s recovery momentum.

Fresh data from the Kenya National Bureau of Statistics (KNBS) shows that exports of the commodity rose from Sh31.3 billion in a corresponding period last year, marking the fastest expansion since 2022 when the value surged 51.1 percent to Sh31.4 billion.

The growth reflects a steep rise in average auction prices, which increased to $6.99 (about Sh960) per kilogramme this year from $4.58 (Sh581) last year, outweighing the modest growth in export quantities during the period.

The value of Kenya’s unroasted coffee exports jumped 38.6 percent to Sh43.4 billion in the nine months to September, signalling a price-driven boom that strengthened the sector’s recovery momentum.

Fresh data from the Kenya National Bureau of Statistics (KNBS) shows that exports of the commodity rose from Sh31.3 billion in a corresponding period last year, marking the fastest expansion since 2022 when the value surged 51.1 percent to Sh31.4 billion.

The growth reflects a steep rise in average auction prices, which increased to $6.99 (about Sh960) per kilogramme this year from $4.58 (Sh581) last year, outweighing the modest growth in export quantities during the period.

The latest numbers extend a recovery that began early this year after a difficult 2023 period when value and volumes fluctuated under reduced farm investment and erratic weather.

Kenya’s coffee is sold through the Nairobi Coffee Exchange (NCE) and through direct sales channels that serve Europe, North America, and select Asian markets.

This year’s earnings growth is expected to support farmers in the coming months as cooperatives and estates settle payouts aligned to the higher international price environment.

The strong nine-month showing mirrors earlier signals from global agencies, including a June United States Department of Agriculture (USDA) forecast that projected higher Kenyan production on the back of favourable prices and improved farm practices.

The USDA anticipated 13.3 percent growth in Kenya’s coffee production to 850,000 bags in the 12-month marketing period that started in October this year, up from 750,000 bags produced in the period ended September.

The agency, through its foreign agriculture service division, said the expected rebound would be informed by higher coffee prices, the government’s ongoing coffee reforms programme, and the slowdown by farmers in converting their coffee plantations into real estate business.

‘Following a year of high prices, farmers will be able to increase fertiliser application and improve disease and pest control. In addition, coffee plantations will be at the peak of the biennial production cycle that is characteristic of Arabica coffee,’ the US agency wrote in a report dated May 15.

The government has been pushing reforms intended to improve transparency at the auction, streamline licensing, and stabilise marketing structures to protect farmers from value losses.

The reforms include transferring oversight of the NCE to the Capital Markets Authority (CMA) and licensing new brokers to widen competition in marketing services.

Europe remains the dominant destination for Kenyan coffee, taking more than half of all shipments, followed by the United States and emerging Asian buyers.

The World Bank Group has raised Kenya’s economic growth outlook for 2025 on a stronger-than-expected rebound in the construction sector, signalling renewed momentum in public projects such as roads and affordable housing.

In its latest Kenya Economic Update, the global lender projects the country’s GDP -an output measure of all economic activities by the government, companies and individuals- to expand by 4.9 percent this year, an upgrade from 4.5 percent in May.

The revision follows what the bank described as ‘an upward surprise’ in the second quarter of 2025 when economic activity accelerated faster than anticipated, supported largely by an unexpected revival in construction.

The sector’s performance had previously contracted to levels last seen more than two decades ago, hurt by piling government arrears to contractors and constrained credit.

‘Quarter two 2025 represented an upward surprise for us. There was faster than expected recovery in the construction sector. We didn’t anticipate that before,’ Jorge Tudela Pye, World Bank Country Economist for Kenya, said on Monday during the launch of the report.

‘This translates into higher growth across the sectors: services, agriculture and industry.’

The Kenya National Bureau of Statistics (KNBS) reported in October that real GDP expanded by five percent in the second quarter of the year compared with 4.6 percent in a similar period last year, partly driven by the rebound in construction activity.

The KNBS data showed the sector expanded 5.7 percent in the quarter, reversing a two percent contraction in the same period a year earlier.

The turnaround was driven by increased spending on affordable housing projects and a renewed push by President William Ruto’s administration to settle long-standing road construction arrears.

Central to the clearance of a backlog of contractor debts was the securitisation of part of the Road Maintenance Levy Fund – collected from the Sh25 per litre tax on petrol and diesel.

Kenya plans to issue Sh300 billion in road bonds, backed by Sh12 of every Sh25 per litre of fuel. Of this, Sh7 will settle pending bills through a first bond tranche of Sh175 billion, while Sh5 will service a second bond of Sh125 billion covering future road works.

The World Bank report further says that falling interest rates, relatively stable inflation and improved credit growth have also helped lift economic activity, boosting demand for building materials, transport services and specialised labour.

Growth in GDP should ideally mean people are earning and spending more money. This should result in increased tax receipts, which the government should ideally spend on improving public services such as education, healthcare and security.

The GDP measure has, however, been criticised for not showing how income is split across various working groups, hence expansion in GDP could sometimes be a result of the rich getting richer and the poor getting poorer.

The report shows formal wage employment has grown by an average of 0.8 percent over the past decade through 2024, while real wages per worker have fallen by 10.7 percent.

Informal jobs -typically lower-paying and less productive- continue to dominate Kenya’s tough labour market, with formal employment falling to 15.5 percent of the workforce in 2024, down from 18.5 percent in 2010.

‘What that means is that most workers joining the labour force, especially the youth, are obtaining informal, lower-paying, and unproductive jobs,’ Mr Pye said.

‘Deeper structural reforms are needed to unlock productivity growth that translates into higher real wages and creates better living conditions for Kenyans,’ he added.

Despite the stronger short-term outlook, the World Bank cautioned that Kenya faces persistent vulnerabilities such as revenue shortfalls, climate-related shocks, political and social tensions as well as heightened geopolitical tensions that can affect commodity prices like oil prices that could stall momentum.

Paramount Bank has raised Sh332 million through a rights issue, pushing its core capital above the regulatory minimum amid links to a possible takeover by a Nigerian lender.

On Monday, the lender said the amount has helped take its core capital to Sh3.118 billion as at the end of September, compared with Sh2.75 billion it held at the end of June this year.

The latest figure means that the lender is now compliant with the requirement to close the year with a minimum core capital of Sh3 billion.

‘The strengthened capital position enables us to scale up lending, enhance operational resilience, and continue providing innovative financial solutions to our customers,’ said Ayaz Merali, CEO at Paramount Bank.

The fresh capital comes amid revelation that Nigeria’s second largest bank by asset base, Zenith Bank, has sought regulatory clearance to acquire the Kenyan lender.

Paramount’s strategy reflects a similar move by Sidian Bank, which has also turned to a rights issue to secure fresh capital for long-term compliance after the minimum core capital requirement was raised from Sh1 billion and set to rise gradually to Sh10 billion by 2029.

The minimum core capital in the banking sector was, through the Business Laws (Amendment) Act 2024, revised upward from Sh1 billion to Sh3 billion by the end of December, Sh5 billion by the close of 2026, Sh6 billion by the end of 2027, Sh8 billion in 2028 and Sh10 billion by the close of 2029.

The timelines for fresh capital mean that Paramount will require close to Sh2 billion come next year if it is to remain compliant. If the Zenith deal materialises, it will relieve Paramount’s shareholders from another capital raising come next year.

The Kenyan lender is keen on expanding its digital banking and payment solutions, strengthening SMEs and trade finance support, enhancing its risk and compliance frameworks and investing in sustainable and inclusive growth initiatives.

Paramount was among the 11 lenders that were left requiring additional capital as a result of the revision of the core capital rules.

Other lenders whose core capital was below Sh3 billion by the end of June this year were M-Oriental, ABC Bank Kenya, Premier Bank, CIB International Bank, Middle East Bank Kenya and the Development Bank of Kenya, UBA Kenya Bank, Credit Bank Plc, Access Bank Kenya and Consolidated Bank of Kenya.

The 11 lenders were by the end of June this year needing to raise a combined extra Sh14.7 billion to comply with the new minimum Sh3 billion core capital.

Central Bank of Kenya (CBK) banking sector stress test – an assessment of banks’ ability to withstand economic or financial shocks while remaining stable – published in September showed the lenders had submitted their plans for shoring up capital.

The stress test showed CBK stands ready with three options including ‘downgrading such banks to microfinance banks and reinstate them upon meeting the new core capital requirements.’

Earlier this year, CBK asked 24 banks whose core capital was below the final core capital target of Sh10 billion to submit plans detailing how they intend to raise new funding to meet the new enhanced requirements.

John Mbadi, as Kenya’s Cabinet Secretary for the National Treasury and Economic Planning, carries a tremendous responsibility at a crucial juncture.

Faced with considerable challenges-ranging from high public debt and inflationary pressures to youth unemployment and regional disparities-Mr Mbadi’s priorities underscore an admirable vision.

His commitment to mobilising private capital through public-private partnerships, equitable distribution of resources and reforming tax systems, all form a solid backbone for steering Kenya toward stability and growth.

However, to fully meet Kenya’s multifaceted economic realities, it is essential to consider a more expansive and nuanced approach, one that not only builds on his stated priorities, but also aggressively harnesses Kenya’s demographic potential and global best practices, to create a genuinely sustainable development path.

At the core of Mbadi’s strategy is the mobilisation of private capital, especially via partnerships aimed at infrastructure, manufacturing, technology, logistics and education, and healthcare sectors- areas foundational to Kenya’s long-term economic competitiveness.

Addressing infrastructure gaps is crucial, as these directly impact productivity.

While this focus rightly targets investment deficits, it can be further strengthened by emphasising the creation of an enabling environment for domestic and foreign investors through regulatory reforms, reductions in bureaucratic bottlenecks and transparent contractual frameworks that enhance investor confidence.

Equitable resource distribution; a priority Mr Mbadi has explicitly voiced, holds key social and economic significance, given Kenya’s entrenched regional disparities.

His commitment to prioritise marginalised counties by rolling out development projects, ensures that growth benefits resonate nationwide and prevent social fissures.

Here, the integration of county governments in planning and budgeting processes under the public planning bill, must be executed with rigor to avoid misallocation and inefficiency.

Strengthening capacity at county levels and enforcing accountability will be crucial measures, combined with participatory mechanisms that engage local communities to meet actual needs.

Tax reform and revenue mobilisation remain critical pillars in Mr Mbadi’s fiscal management blueprint. His emphasis on reforming and modernising the Kenya Revenue Authority (KRA) through digitisation and AI-enabled enforcement mechanisms, is forward-looking and essential to broaden the domestic revenue base without increasing tax rates unduly.

Nevertheless, this should be paired with deliberate efforts to foster taxpayer education and build trust, particularly tackling widespread evasion and corruption perceptions that undermine compliance.

Simplifying tax codes, streamlining procedures and embracing technology must be matched by visible, fair enforcement to create a culture where all Kenyans see tax compliance as patriotic and beneficial.

On fiscal prudence and debt management, Mr Mbadi is rightfully cautious. The soaring wage bill, which threatens to crowd out capital expenditure, demands stringent controls, yet management of public sector-pay must remain sensitive to social contracts and political realities.

Phased payment of dues to unions, as Mr Mbadi advocates, reflects pragmatic problem-solving that balances fiscal discipline with labour relations.

Too often, fiscal austerity is misunderstood as across-the-board cuts. Instead, Kenya should focus on improving the quality of debt-favouring concessional and long maturity sources-and monetise assets strategically, channeling proceeds into sovereign wealth and infrastructure funds rather than filling recurrent budget gaps.

More aggressive restructuring of high-cost external debt, including innovative mechanisms like China’s conversion of Kenyan debt to renminbi, could provide fiscal space without jeopardising credit ratings.

Greater transparency in debt reporting coupled with independent external audits will also reassure investors and citizens.

The planning dimension Mr Mbadi advances through the public planning bill is commendable, fostering an evidence-based, synchronised budgeting process aligned across national and county governments.

Still, this reform needs clear implementation timelines, capacity upgrades and monitoring frameworks to translate law into practice effectively.

Without this, the bill risks becoming a well-intended but underutilised tool.

Arguably the most pressing challenge for Kenya’s development is its demographic profile. Mr Mbadi’s policies must therefore go beyond conventional employment creation to include robust investments in education reform that focus on skills relevant to evolving labour markets.

Moreover, the social dimensions of unemployment-mental health challenges, disillusionment and social instability-require integrated approaches linking economic and welfare policies.

The Treasury could explore social impact bonds and other innovative financing methods to fund youth-focused social programmes.

Comparative analysis with Thailand’s management of its Asian Financial Crisis in the late 1990s provides valuable lessons. Thailand faced sharp currency depreciation, banking sector collapse, high recessionary pressures, and social hardship-paralleling Kenya’s current fiscal stress marked by elevated debt ratios and external vulnerabilities.

Thailand succeeded by implementing rigorous fiscal consolidation, deep financial sector reforms, transparent governance, and fostering private sector dynamism, while cushioning social effects with employment support programmes. Kenya’s trajectory may well benefit from adopting a similar comprehensive approach.

To achieve these ambitious objectives, Mr Mbadi must fast-track the operationalisation of reforms, moving beyond policy statements to demonstrable actions with clear milestones.

In conclusion, while Mr Mbadi’s priorities provide a robust framework, their success hinges on deepening reforms, fast-tracking implementation, embedding youth empowerment and balancing competing demands through transparent governance and inclusive participation.