Category: Business Daily

Trust is the bedrock of economic growth, the efficient functioning of institutions, and social cohesion. In financial services, it is the invisible currency that underpins every transaction.

Yet, in many markets, trust remains fragile, particularly in insurance, where perceptions of opacity, cultural skepticism and past disappointments continue to erode confidence.

Kenya’s insurance sector illustrates this reality vividly. For decades, penetration has lagged peer economies. As of the financial year 2024, the country’s insurance penetration stood at 2.4 percent, according to the Insurance Regulatory Authority (IRA), a figure well below the global average of seven percent reported by the Swiss Re Institute.

Negative consumer experiences, delayed claims, opaque terms and insufficient disclosure have entrenched the notion that insurance is an unnecessary expense rather than a vital safeguard.

The industry must urgently confront these cultural weaknesses. Transparency, simplified products and customer-centric claims management are non-negotiables.

But perhaps more importantly, the sector must rethink distribution by borrowing credibility from institutions that already command trust, i.e. banks.

Unlike insurers, banks are deeply embedded in everyday financial life. Customers entrust them with salaries, mortgages and investments, reflecting a long-standing confidence in their ability to protect and manage assets.

This reservoir of trust presents an extraordinary opportunity for bancassurance. By leveraging the credibility banks already enjoy, the sector can reposition insurance as a natural extension of financial planning rather than a reluctant afterthought.

According to the data from Association of Kenya Insurers, bancassurance premiums expanded from Sh19.5 billion in 2019 to Sh35 billion in 2023, a 79.4 percent increase. Over the same period, Bancassurance distribution captured a larger market share, rising from 8.4 percent to 10 percent.

While correlation does not imply causation, the evidence strongly suggests that when insurance is offered through trusted intermediaries, adoption increases.

The advantage extends beyond distribution. Banks hold unmatched insights into customer life cycles and financial behaviour. This intelligence, applied responsibly and with respect for data privacy, can enable banks to recommend insurance products that are both timely and relevant.

For instance, a young professional opening a salary account can be introduced to affordable health coverage, while a mortgage holder can seamlessly be guided toward property protection, essentially considering a consumer’s full ecosystem and bundling relevant insurance products with the banking service they are seeking.

In such cases, insurance ceases to feel like a gamble and instead becomes a rational, personalised safeguard.

Equally vital is customer education through workshops, digital platforms and direct engagement. Banks are uniquely positioned to demystify insurance. By explaining claims processes clearly, highlighting success stories and demonstrating the tangible benefits of coverage, banks can reframe insurance as a tool for resilience rather than a reluctant obligation.

Globally, bancassurance has proven transformative.

In Europe, for instance, it became the dominant distribution model precisely because customers were more willing to buy insurance from their banks than from little-known insurers (Ernst and Young, 2021), and Kenya’s banks can emulate this success.

The Auditor-General has flagged under-allocation of tenders to marginalised businesses by Kenya Power in the year ended June 2025, even as the firm awarded deals worth Sh3.5 billion to the groups.

The Auditor-General, Nancy Gathungu, says that the firm failed to meet the constitutional requirement that mandates all State-owned entities to reserve 30 percent of all tenders for businesses owned by youth, women, and persons with disabilities under Access to Government Procurement Opportunities (Agpo).

‘Review of the company’s approved procurement plan for the year under review revealed that only 11 percent of the procurement budget was reserved for disadvantaged groups,’ Ms Gathungu said.

Kenya Power disclosed that the value of tenders awarded to these groups jumped 470 percent to Sh3.5 billion in the year under review as the firm stepped up efforts to meet the constitutional requirement.

The Public Procurement and Asset Disposal Act, 2015, compels State corporations to allocate 30 percent of their tenders to these three groups under Agpo, as part of economic affirmative action that was launched more than a decade ago.

Agpo targets deals that are not highly technical, such as the supply of common-user items and basic services. This means the groups automatically miss out in any year when a State agency focuses more on highly technical projects.

Out of the Sh3.5 billion worth of deals awarded under Agpo, youth-owned businesses took Sh2.2 billion, followed by women-owned businesses with Sh1.25 billion, and persons with disabilities with Sh66.7 million.

Kenya Power is one of the State-owned firms whose tendering under Agpo for the year ended June 2025 has already been scrutinised by the Auditor-General.

Kenya Electricity Generating Company (KenGen) disclosed that it awarded Sh2.23 billion in deals under Agpo against a target of Sh2.57 billion in the year ended June 2025.

Gulf Energy wants the government to extend the railway to Lokichar in Turkana County by 2030 to transport crude oil to the port of Mombasa, marking a departure from the State’s earlier plan to build a pipeline.

The firm has in its Field Development Plan (FDP) proposed the construction of a meter-gauge railway (MGR) from Lokichar, then connect it to the main MGR line at Kitale, Eldoret, Nakuru, Nyahururu, or Nanyuki.

The proposed construction of the railway, to be fully funded by the government, is a shift from the earlier plan to build an export pipeline from the oilfields to the port of Lamu at an estimated cost of $1.5 billion (Sh193.5 billion at current rates).

Gulf Energy targets to start commercial production of the oil from six discoveries within blocks T6 and T7 in South Lokichar by the end of 2026 and will initially rely on trucks to transport the commodity when production starts at 20,000 stock tank barrels per day (stb/d).

‘GEBV (Gulf Energy BV) requests that GOK (Government of Kenya) provide a railway line in Lokichar, Turkana by H2 (second half) 2030 to support increasing production to 50,000 stb/d,’ Gulf Energy says in the FDP, which is now awaiting ratification by Parliament.

The combined costs of trucking and rail transport in the two phases are estimated to be $5.32 billion (Sh687.29 billion at current rates).

Oil production will be done in stages, with the first stage targeting 20,000 stb/d from 48 wells in the Ngamia and Amosing fields. Monthly exports are projected at 600,000 barrels.

The second phase will ramp this to 50,000 stb/d and will extend the project area to the Twiga, Ekales, Agete, and Etom oilfields. The monthly exports are anticipated to jump to 1.5 million barrels.

The FDP shows that 600 trucks will be deployed daily in phase one and 155 rail wagons daily when the production is stepped up in phase two.

‘Apart from extension of the railway line, the Government or its railway agents will need to invest in sufficient rolling stock, railway line rehabilitation, and construct appropriate railway siding at KPRL (Kenya Petroleum Refineries Limited) to enable the operation,’ Gulf added.

The shift to a hybrid transport of trucks and trains is intended to minimize capital cost while maintaining production potential, helping Kenya to fast-track gains from the project.

Gulf fully bought the Block T6 (formerly 10BB) and Block T7 (previously 13T) from Tullow Kenya BV (the Kenyan subsidiary of British oil explorer) in a $120 million (Sh15.5 billion) deal that was closed in October this year.

The Kenyan oil company intends to start commercial production of the crude oil by December 2026. This plan got a major boost after the Ministry of Energy approved its FDP and sent it to Parliament for ratification.

The MGR currently terminates at Eldoret, and its extension to South Lokichar is seen as more viable than using trucks per day to ferry the crude oil from the wells to Eldoret, from where it is loaded onto the rail.

Failure to extend the rail to South Lokichar could see Gulf forced to deploy a fleet of 1,500 trucks to ferry the commodity when production progresses to 50,000 stb/d.

Gulf says that the government can opt to extend the Standard Gauge Railway (SGR) line from Naivasha to Lokichar, setting the stage for haulage of 561 barrels per wagon.

The SGR currently terminates at Naivasha, but it is set to be extended to Kisumu and the border town of Malaba.

The extension, which is meant to ease movement between Kenya and Uganda, is likely to be funded via a 15-year bond worth Sh390 billion.

Women cyclists choose to ride their bikes for various reasons-fitness, both mental and physical, hobby, networking, community building, or simply as an easy escape from life’s stresses.

However, for some, it is an act of defiance, a protest against societal restrictions that often try to dictate that women must never cycle.

These two women have not only dispelled this myth but have done so glamorously, earning medals and accolades at a level where few believed in them.

More importantly, they are winning the most significant medals of their lives-staying fit and restoring order and balance in their lives.

Julia Alice lets her bike lean gently against a wall, takes off her helmet as she settles down after her around-the-estate ride.

There’s an ease to how she handles it, like an appendage or a part of her she can detach easily but can’t truly live without.

At 37, the mother of two is among a small but growing number of Kenyan women cyclists pushing boundaries in a sport that is still largely male-dominated, underfunded, and misunderstood.

Alice’s journey began miles away from the well-paved roads of Kahawa West, where we meet her and her daily training circuit. She was born in Nyandarua, the fifth of several children, and lost her father when she was still in primary school.

Her mother fell ill soon after, leaving her and her siblings to navigate childhood amid economic struggle.

‘When my mother got sick, I was still in school. No one was around to care for her, so my sisters took her in, and I had to leave home to live with one of them.’

That move took her to Samburu, a place that would quietly spark a lifelong love for cycling.

In Samburu, bicycles were as they are now, not toys. They are essential lifelines. She watched schoolboys glide past on their bikes as dust rose behind them.

‘I wasn’t good at it at first. Back in our village in Nyandarua, there weren’t many bicycles. But when I saw how the kids in Samburu used them, I wanted to learn.’

Her elder brother taught her to balance and pedal. She believes the lessons on those uneven, dusty roads made her the cyclist she is today.

Soon she was riding 6km to school every day, barefoot, using her sister’s child’s bike. ‘It wasn’t much about racing; it was survival, mobility, and curiosity.’

Even then, she was the girl who joined every game, every sport and every race.

Adult-hood slowed down that pace. She completed high school in 2010, joined KCA University for CPA classes, then got married and had her first child.

‘By the time my daughter was two years old, I had stopped studying,’ she says. ‘I started focusing on my family.’

Like many young Kenyan mothers, her dreams had to negotiate with household realities.

Then in 2019, she saw a friend post a sleek modern racing bike. Light, fast and nothing like the heavy ‘Black Mamba’ bikes she grew up seeing. Her curiosity came alive again.

‘He told me the team was looking for riders and added me to their WhatsApp group,’ she remembers. ‘That’s how I found RDX Cycling Club.’

Entry into the sport wasn’t cheap. She bought a 19kg bike for Sh30,000 – a mobile app loan she took, a risk, and a quiet gamble.

‘But I told myself, God has a plan. You start small then purpose to grow.’ She trained daily and saw he weight drop from 78kg to 58kg.

Her commitment impressed fellow cyclists so much that within 11 days, they helped her buy a professional bike worth over Sh80,000.

That same year she entered the Tour du Burundi. Her first international race.

A gruelling five-day stage event. She finished in the top ten – a remarkable debut by any standards.

When the races slowed down during the pandemic, Alice did not. She trained whenever she could.

‘There were many group rides. I’d leave my kids with their father or my sister, join the group on weekends, and ride to places like Machakos or Mai Mahiu.’

Those were chaotic years, she admits, balancing family love and personal ambition and passion especially, but they brought structure and confidence.

Since then, Julia has compiled a résumé most Kenyan cyclists – male or female – would envy: Kenya Cycling Federation races in Nairobi, Naivasha, Machakos, the African Championships in Egypt where she won three silver medals in paracycling, the Safari Classic Ride, Ride Karura Challenge, Tour de Machakos, and the Jubilee Live Free Ride in 2025, where she placed in both able-bodied and paracycling categories.

Her two children now cycle competitively. ‘I want them to start early,’ she says.

‘When you begin young, you learn to understand the bike like a friend.’ Their father supports their routine. At home, cycling is part sport, part family language.

Kenyan endurance sports have always been tough for women – the cost, the safety concerns, the time demands. ‘You can have the talent,’ Julia says, ‘but if you don’t have support, you can’t go far.’

Her journey to becoming a professional cyclist has seen her navigate motherhood, financial pressure, loss, and ambition.

‘You can’t think only about medals. You think about what you are leaving behind. The example you’re setting.’

For three weeks every month, Valentine Onchari, 32, kits up, saddles her bicycle and heads out to work-she pushes into traffic for a 25-kilometre ride to the office. She does the same in the evening. 50km a day. Five days a week.

‘It sounds crazy, but cycling is the one thing that gives me order in a very busy life,’ says the project consultant at Japan International Cooperation Agency.

Her love for cycling also began in high school. At Aga Khan High School in Mombasa, she took up swimming and cycling almost simultaneously.

‘I was that sporty child. If you needed someone for a race, a swim or a ride, I was there. And I was lucky because my family and the school supported every bit of it.’

She entered her first triathlon as a teenager. She still remembers with great fondness her first cycling outreach, ‘I must have been around 15 or 16. The details are blurry, but I remember the feeling-just wanting to finish, wanting to prove to myself that I could do it.’

Adulthood rearranged things. She stopped swimming first, then gradually cycled less and less.

‘Life happened. School, work, marriage, children-you know how it goes.’ Nearly a decade passed without structured riding.

In early 2024, something tugged her back. ‘It wasn’t planned,’ she adds. ‘Something in me just said: go back. So, I listened.’

The return was anything but glamorous. ‘My old bike was basically dead. I had no gear. Nothing. And cycling is not a cheap sport.’

She bought what she calls ‘a proper bike’ and slowly rebuilt her kit. ‘Just the bike alone is a big cost. Then there’s the helmet, lights, bike computer, shoes, kits-before you know it, you’re deep into your savings.’

Her body wasn’t ready either. Years away from the road demanded repayment.

Valentine had full-time work, graduate school, a marriage and two children – no time for long training rides.

So, she built cycling into her commute. ‘Cycling forces you to plan your day. You can’t wake up late. You can’t procrastinate. With it, my time management got better.’

Her family adjusted to her new routine. ‘If it’s a weekend race or long ride, they know Mum is out there. And they support me. That is everything.’

Like Julia, she faces the unique dangers of being a woman on Nairobi’s roads.

‘I wish I could say the danger is only about traffic, but being a woman on a bike-that’s a different story. You get comments, stares, people thinking you don’t belong on the road.’

She has turned back home on days when her instincts warned her. ‘Safety comes first.’

Months into her return, she joined a team-the Gravel Riders Club-and entered a race – just to finish, she told herself. She finished fourth.

‘Some people have been training consistently for years. I had been back for one year. So yeah, it meant a lot.’

In 2025, she joined a six-member team for the Jubilee Live Free Grand Nairobi Race.

‘Team races are different. You start together. You work together. You draft, you pace, you adjust as a group.’ They won the team category. ‘It was beautiful. Truly. I felt proud of us.’

Cycling has changed her body, her mind, her lifestyle. ‘Physically, I’m the strongest I’ve ever been. Mentally, it clears my head. It’s free therapy.’

She watches what she eats. Hydrates better. Sleeps intentionally. ‘My body tells me what works and what doesn’t.’

Her message to women – especially mothers juggling many roles?

‘Start where you are. Don’t wait for the perfect moment or perfect bike. And don’t feel guilty. Women are taught to apologise for taking time for themselves. Don’t. Cycling makes me a better mother, a better worker, a better person. You deserve something that fills you.’

The Supreme Court has overturned a decision that allowed the Kenya Revenue Authority (KRA) to tax e-commerce card payments, saying the taxman exceeded legal authority by subjecting credit/debit card transactions to withholding tax.

This unanimous decision ends a 13-year legal battle and shields banks from billions of shillings in tax exposure, effectively forcing KRA to rethink how it approaches taxation in a rapidly digitising payments ecosystem.

In a precedent-setting verdict, the apex court set aside the Court of Appeal’s 2020 finding that ABSA Bank Kenya’s payments to global card companies-Visa, Mastercard, and American Express-amounted to royalties, and that interchange fees paid to local issuing banks qualified as management or professional fees.

Both classifications had attracted withholding tax demands since 2011.

Chief Justice Martha Koome-led bench affirmed KRA violated constitutional Article 210’s requirement that taxes must be imposed strictly under legislation.

“A tax cannot be imposed in a vacuum. Taxpayers deserve specific clarity on their obligations,” the court emphasised, criticising KRA’s reliance on conjecture rather than statutory definitions.

Article 210(1) of the Constitution provides that ‘no tax or licensing fee may be imposed, waived or varied except as provided by legislation’.

The dispute originated from KRA’s 2011 audit of ABSA (then Barclays Bank Kenya), demanding withholding tax on two streams: network fees paid to the global card firms and interchange fees shared with issuing banks.

While the High Court quashed these assessments in May 2015, the appellate court reinstated them through the November 2020 verdict, prompting ABSA’s Supreme Court appeal, which was certified as constitutionally significant.

Central to the case was whether card transactions fit the Income Tax Act’s definitions of “royalty” or “management/professional fees.”

The court rejected KRA’s expansive interpretation, insisting legal definitions should not be stretched to fit modern payment systems.

“The taxing authority cannot exercise powers based on generalized opinion,” the judges ruled, noting explicit contracts showed Mastercard and American Express did not charge royalties, while Visa’s agreement was silent.

“Justice is not served by disregarding clear contractual terms,” they added.

Since the gist of the dispute was whether card payment processes fall within the definitions of ‘royalty’ or ‘management and professional fees’ under Sections 2 and 35 of the Income Tax Act, the Supreme Court said the definitions must be applied as written, without stretching them to fit modern commercial arrangements.

On interchange fees-small percentages retained by issuing banks per successful transaction-the court dismissed KRA’s characterisation as payment for services.

Instead, it ruled these constitute revenue components within merchant service fees, not compensation for managerial/technical services.

“This composite financial process cannot be forced into tax categories Parliament never envisioned,” the judgment stated, underscoring legislative intent’s primacy in tax matters.

The verdict shields banks from billions in potential liabilities while compelling KRA to recalibrate its approach to digital payment taxation.

Banking sector players had warned that KRA’s interpretation would have increased transaction costs, ultimately passed to consumers.

Kenya Bankers Association, which participated in the court case as an interested party, argued that sustaining the tax would have disincentivised cashless payments-counter to Kenya’s financial inclusion goals.

The Association held that KRA’s approach to card-related payments threatened Kenya’s cash-lite ambitions.

Industries heavily reliant on card payments-including tourism, retail, hospitality, and transport-stood to bear the brunt of such cost increases.

The Supreme Court appeared alive to those concerns, noting the importance of certainty and predictability in taxation, especially in sectors that support the national digital payments agenda.

“Certainty of law remains fundamental to rule of law, including tax law,” the court observed, signaling judicial reluctance to uphold creative tax interpretations lacking legislative grounding.

The court ordered parties to bear their own costs, closing a marathon litigation that began when Kenya’s digital payments ecosystem was nascent.

Today, with mobile money processing billions daily and card transactions rebounding post-covid19 pandemic, the verdict provides much-needed clarity for financial sector players.

“We are of the opinion that this litigation is not one suitable for visiting any of the parties with costs, given the fact that, each of them has participated in a protracted dispute that has resulted in a final clarification of the law, which should go a long way in serving the Country’s revenue collection, financial and banking system, and the tax paying public,” said the judges.

The peak demand for electricity hit a new high of 2,418.77 Megawatts (MW) in November-the fifth such feat this year alone, turning the spotlight on the country’s ability to meet the fast-rising demand or risk rationing of supplies.

KenGen Managing Director Peter Njenga disclosed that the peak was recorded last month, upstaging the previous high of 2,411.98MW recorded in October.

The fast-rising demand looks set to pile pressure on the country’s ability to generate sufficient power locally to match the rise in consumption amid a deepening reliance on hydropower from Ethiopia and Uganda to boost supplies.

Kenya Power is racing to ensure enough electricity supplies as industries and homes consume more amid a surge in the number of connections.

‘National power consumption reached record highs in November as peak demand climbed to 2,418.77MW and energy dispatch hit 44,555.80 Megawatt-hours, underscoring increased industrial activity,’ Mr Njenga said yesterday at the firm’s Annual General Meeting.

The peak demand has jumped by 102.77MW since the start of this year, from the 2,316MW recorded in February. Peak demand refers to the time of the day or night when electricity consumption is highest.

It mainly occurs when industries are operating at peak, and many people are using appliances and devices simultaneously.

The surge in electricity demand exerts pressure on the local production of electricity from geothermal and hydro, which has nearly stagnated, forcing Kenya Power to tap more imports from Ethiopia, Uganda, and Tanzania amid power rationing.

Kenya Power has been forced to ration some parts of the country from as early as 1700hours to avert a scenario where the grid can collapse due to a mismatch in demand and supply.

Geothermal and dams are the mainstay of the national grid, but production from these sources grew marginally in the year ended June 2025.

Hydropower generation from local sources grew three percent to 3,504Gigawatt-hours (GWh) in the period from 3,396GWh a year ago, while geothermal grew at less than one percent to 5,718GWh from 5,707GWh in the same period.

Electricity imports surged fastest to 1,534GWh from 1,199GWh, reflecting a rise of 28 percent in the same period.

In recent months, both the Kenya Power and Lighting Company Plc (KPLC) and President William Ruto have acknowledged that, without additional capacity, load shedding will be necessary to balance the system.

Parliament last month, however, voted to lift a ban on new power purchase agreements, raising hope of new generation projects.

‘The lifting of the moratorium marks a decisive reopening of Kenya’s power generation pipeline and reflects the government’s urgency to address supply deficits and growing demand. Its practical impact, however, will hinge on how quickly the new conditions, particularly the shift to competitive procurement, are implemented,’ Aleem Tharani and Edwin Baru, Partners, and Beatrice Ngunyi, Associate, at law firm Bowmans Kenya, said in a commentary.

Kenya Power buys hydropower from Ethiopia under a 25-year deal. The firm also has power exchange deals with Uganda and Tanzania, where the net importer pays at the end of a defined period.

Kenya inked a deal to import electricity from Ethiopia from November 2022, with the power priced at $0.065 (Sh10.2) per kilowatt, but Kenya is keen to exercise a clause in the contract that allows for tariff renegotiation from 2027 at the earliest.

Kenya has been the main importer in the two deals with Uganda and Tanzania, highlighting the country’s local generation woes.

Treasury Cabinet Secretary John Mbadi says the government is reviewing its shareholding in several State-owned enterprises but has yet to decide whether to follow the National Social Security Fund (NSSF) in offloading its stake in East African Portland Cement (EAPC).

Mr Mbadi said the Treasury is assessing its investments in commercial State corporations to determine which ones are ‘mature enough’ for privatisation.

However, he said no conclusion has been reached on Portland Cement.

‘No, we haven’t,’ he told the Business Daily on Friday when asked whether the Treasury intends to sell its stake in EAPC.

‘We are reviewing all our stakes in the state-owned enterprises that we feel are mature for offloading. If Portland is mature enough to warrant that, then we will, but I cannot comment on that yet.’

NSSF and Treasury own 27 percent and 25.3 percent of Portland Cement, respectively. EAPC’s biggest shareholder, Kalahari Cement, is buying the pension fund’s stake in the company for Sh1.6 billion.

The purchase will give Kalahari’s owner, the Tanzanian tycoon Edhah Munif, effective control of EAPC, with an eventual stake of 68.7 percent.

Mr Munif currently holds a 41.7 percent stake in EAPC through Kalahari Cement (29.2 percent) and his wholly owned Bamburi Cement (12.5 percent).

Already, President William Ruto has passed the Government Owned Enterprises (GOE) Act, which guides the privatisation of State corporations, including the Kenya Pipeline Company (KPC).

Under the plan, the State seeks to encourage private investment and lessen the fiscal pressure from loss-making and non-performing government entities. It is targeting billions of shillings to reduce reliance on debt and address budget deficits.

‘We are reviewing a number of them, including KenGen,’ Mr Mbadi said, referencing the electricity generator, whose 70 percent stake the government owns.

‘Leave alone for revenue raising; we feel we want to reduce our stake in commercially viable enterprises because of the advantages that come with privatisation, like improved efficiency and better governance structure.’

So far, Mr Mbadi’s ministry has signed a deal to offload a 15 percent stake in Safaricom to South Africa’s Vodacom Group for Sh204.3 billion or Sh34 per share.

The sale is expected to be completed in the first quarter of 2026 and will see the government’s stake in the telco drop from the current 35 percent to 20 percent.

Treasury is leveraging future dividend entitlement on the residual stake to get more cash in the transaction.

The exchequer sold the right to receive future dividends of Sh55.7 billion to Vodacom at a price of Sh40.2 billion, thus surrendering Sh15.5 billion in future dividends from Safaricom.

Concurrently, Vodacom is also buying a five percent stake in Safaricom that is held by its parent firm, UK-based Vodafone Group, at the same price of Sh34 per share.

Once the two transactions are concluded, Vodacom will raise its ownership in the telco to 55 percent, giving it control after spending a total of Sh272.4 billion on the share purchases.

Mbadi has said the proceeds of the share sale will provide the seed capital for the proposed Infrastructure and Sovereign Wealth Funds, which will support projects in energy, roads, water and irrigation, and airports.

This includes the construction of 50 dams and an upgrade of the Jomo Kenyatta International Airport (JKIA) in Nairobi after the government last year cancelled a deal with India’s Adani Group over its founder’s indictment in the United States.

MPs have also approved KPC’s privatisation, which will see the government retain not less than 35 percent shares while releasing not more than 65 percent of its ownership.

Treasury expects to raise approximately Sh100 billion from the initial public offering at the Nairobi Securities Exchange (NSE). The listing’s deadline is March 31, 2026.

Kenyan banks are accelerating their investment in artificial intelligence (AI) and machine learning, with deployment now concentrated in credit decisioning, fraud detection, cybersecurity, and customer-service automation.

These functions are becoming the first testing ground for AI as lenders pursue faster processing, tighter risk controls, and leaner operations.

One in two financial institutions, including commercial banks, microfinance lenders, and digital credit providers, have already integrated AI tools into at least one business process, according to a March 2025 survey by the Central Bank of Kenya (CBK).

Credit modelling has become the main use case for AI across major lenders so far, as banks strive to increase speed while maintaining prudent risk controls.

‘We have, over the years, adopted AI. it is currently deployed in some critical business areas driving credit decisioning,’ Dennis Volemi, the Group Director of Technology for KCB, told the Business Daily.

KCB is Kenya’s largest lender by assets. As per the CBK survey, credit has been the leading AI application across the sector, with banks using models to analyse payment histories, assess micro-borrower patterns, and automate routine lending decisions like determining whether to approve loan applications and on what terms.

At Absa, Chief Data Officer for Africa Hartnell Ndungi said AI supports credit analytics, customer lifecycle modelling, and risk monitoring, enabling more granular scoring and early detection of distressed accounts.

AI has also become a key tool in protecting banks from increasingly complex fraud schemes and cyber threats.

KCB says its fraud-monitoring systems already rely on AI to flag suspicious activity in real time, while Absa uses machine-learning models in risk-monitoring workflows.

Machine learning (ML) is a subfield of AI that uses algorithms to enable computers to learn from data, identify patterns, and make predictions or decisions with minimal human intervention.

CBK’s report shows that banks are using anomaly-detection models to identify unusual network activity, automate threat triage, and speed up incident response.

‘The top three applications of AI and ML by institutions that had adopted AI were credit risk assessment at 65 percent, cybersecurity at 54 percent, and customer service at 43 percent.

This was followed by e-KYC at 41 percent and fraud risk management at 40 percent,’ CBK said.

At the same time, conversational artificial intelligence, a type of AI that allows computers to understand and engage in human-like conversations using natural language, seems to be among the most mature AI applications in Kenyan banking.

This includes technologies such as chatbots or virtual agents that users can talk to.

Banks are also deploying chatbots and voice-enabled interfaces to ease pressure on call centres and to serve the rising volume of digital customers.

Absa’s bank-wide conversational AI system ‘Abby’ enables customers to perform tasks such as checking balances and transferring funds through WhatsApp.

Equity Bank has a similar chatbot called ‘Eva’, available on WhatsApp, Facebook Messenger, and Telegram.

‘We have deployed systems that allow natural-language querying of data, retrieval of information from policy and operational documents, and voice-enabled interfaces that support hands-free interaction and voice of customer analytics,’ Absa’s Mr Ndungi said.

Another growing frontier for Kenyan lenders is the application of AI to document processing and data structuring.

Absa said its in-house platform, the Citrus AI Suite, includes systems for document intelligence, voice transcription and classification, enabling the bank to extract insights from previously unstructured data such as customer conversations, scanned documents and emails.

These capabilities support credit, risk, and service functions that traditionally relied on manual review.

These widely adopted use cases in Kenya mirror global banking trends, with credit risk assessment, cybersecurity threat monitoring, and customer engagement tools leading uptake.

Yet despite growing momentum, banks cite industry-wide constraints like skills shortages and high implementation costs as the top challenges that continue to limit full-scale adoption.

‘There is high talent scarcity, making highly skilled AI and machine learning operations professionals difficult to recruit and retain,’ said Mr Ndungi.

Legacy systems remain another bottleneck, as integrating advanced models into older core-banking platforms adds cost and complexity and often slows the move from pilot to production.

Per the CBK survey, for instance, 44 percent of AI adopters admit they cannot adequately explain how their models work, compounded by the fact that many institutions rely on third-party vendors.

To address these gaps, banks say they are investing in workforce capability. KCB said it is rolling out group-wide AI literacy programmes, while Absa is embedding AI into staff-facing tools to democratise analytics and operational insights.

Industry players say the business case for AI is strengthening; faster credit decisions, lower fraud losses, more accurate risk insights, and leaner operations, and that the next frontier will be overcoming skills gaps and compliance challenges to scale the systems responsibly.

‘Early deployments are showing measurable impact across selected business areas,’ said Mr Ndungi.

Commercial banks have urged a further cut in the indicative lending rate of the Central Bank of Kenya (CBK), to help boost the pace of lending to the private sector and reduce loan defaults.

Through the Kenya Bankers Association (KBA), the lenders want the CBK Monetary Policy Committee (MPC) meeting set for Monday to cut the Central Bank Rate (CBR) from the current 9.25 percent.

The MPC has cut the CBR in eight successive meetings, with the latest chop coming on October 7, when the rate was lowered to 9.25 percent from 9.50 percent.

KBA says there is scope for a further cut in the benchmark rate to boost private sector lending and further stimulate economic growth in an environment where inflation has remained within the targeted range of between 2.5 percent and 7.5 percent, and the foreign exchange rate is largely stable.

‘We view that there is scope for a further cut in the CBR to bolster private sector credit growth and stimulate economic growth. This move is expected to augment previous cuts in the CBR, signal reductions in funding costs for banks, and encourage further lending rate reductions for enhanced credit growth,’ said KBA in a pre-MPC research note.

Kenya’s headline inflation was 4.5 percent in November compared with 4.6 percent in October, while the shilling has remained largely stable, exchanging at under 130 to the dollar.

The CBR had hit a 12-year high of 13 percent in February last year, where it lasted up to August of the same year, before CBK started cutting it as inflation eased and the Kenyan shilling stabilised against the dollar.

KBA hopes a further cut in CBR would make loans more affordable and attract more private sector borrowers.

The pace of private sector credit stood at 5.5 percent in September, compared to 3.3 percent in August and negative 2.9 percent in January 2025.

KBA’s push comes at a time when the banking industry is transitioning from the risk-based loan pricing model to the Kenya Shilling Overnight Interbank Average (Kesonia)-a benchmark rate that reflects the average interest rate at which banks lend and borrow unsecured overnight funds in local currency.

The new model uses the interbank rate as the common reference rate for determining lending rates to all customers.

Banks are allowed to load a premium (K) on the reference rate, now referred to Kesonia.

The total lending rate is now calculated as Kesonia + Premium (‘K’), where the premium reflects the borrower’s risk profile, bank costs, and shareholder returns.

CBK Governor Kamau Thugge said in September the switch to Kesonia means banks must end ‘excuses’ and cut rates even as lenders decry a sustained higher non-performing loans (NPLs) ratio.

According to KBA, the monetary policy transmission has been strengthened with Kesonia becoming more stable and aligned with the CBR.

However, banks still have concerns around asset quality, despite the NPL ratio easing to 17.1 percent in September from 17.6 percent in June 2025.

‘Concerns of elevated non-performing loans in the market continue to discourage stronger lending as banks remain cautious in lending to avert increasing loan loss provisions,’ said KBA.

Kenya is pushing China to review strict escrow account terms tied to the Standard Gauge Railway (SGR) loan, after the rigid arrangement effectively blocked Kenya from tapping revenues from operations to repay the debt.

The National Treasury says the terms, which require Kenya Railways Corporation to maintain a minimum balance of Sh25 billion in the special account, had driven arrears on the SGR project to Sh413.4 billion by June 2025.

‘This arrangement has effectively locked out loan repayments, resulting in the steady accumulation of arrears despite continued SGR operations,’ the Treasury says in a debt management update.

‘In view of the above, it is recommended that escrow account terms should be renegotiated to allow for debt service alongside operation and maintenance costs,’ it added.

The arrears have piled up despite the SGR generating about Sh112.08 billion in revenue since the launch of commercial operations eight years ago.

Freight services account for more than three-quarters of the income, with passenger trips between Mombasa and Nairobi contributing the remainder.

But none of the revenue has gone towards repaying loans to the State-owned Export-Import Bank of China, the financier of the SGR.

The Treasury blames the rigid escrow arrangement, which has trapped the railway’s cash flows and made repayment nearly impossible.

Under the financing deal, all SGR revenues are deposited into the escrow account, which KRC jointly manages with Exim Bank, requiring that the minimum balance be maintained before any surplus can be applied to loan servicing.

Since the account has never reached the reported threshold of Sh25 billion, no repayments have flowed through from SGR revenues, resulting in KRC loan arrears to the Treasury accumulating even as the SGR project continues to earn income.

The Treasury says that the arrears on the SGR loan-covering overdue principal and accumulated interest- have grown to Sh413.36 billion as of the end of June 2025.

That makes up 80.82 percent of the total Sh511.44 billion arrears, which State Corporations owed Treasury in the form of on-lent and direct loans in the review period.

‘This heavy concentration exposes the Government to significant fiscal risk tied to a single infrastructure project,’ the Treasury said in an update.

Under the SGR financing model, the Treasury services the loans directly, while KRC is expected to reimburse it.

But the breakdown of cash flow due to the arrangement around the escrow account and lower-than-projected revenue has rendered the repayment structure almost unworkable.

The total stock of on-lent and direct loans the Treasury has extended to State corporations stood at Sh1.05 trillion in June 2025, with Sh547.38 billion, or 52 percent, sitting with KRC.

The escalation of KRC arrears tied to the SGR loan has come at a time when the Treasury successfully negotiated with Beijing to reduce the cost of servicing the debt in October.

This was after Nairobi completed the conversion of three dollar-denominated Exim Bank loans into yuan, a shift expected to save the country about $215 million (about Sh27.80 billion) annually in interest.

Previously, the loans attracted floating interest rates of more than 6 percent, driven by the Secured Overnight Financing Rate (SOFR) plus a two-percentage-point margin. Switching to renminbi has cut the cost to about 3.0 percent, according to the Treasury.

‘In US dollars, the interest cost comes to more than 6.0 percent-about 4.6 percent SOFR plus 2.0 percent. But with renminbi it is about 3.0 percent,’ Treasury Cabinet Secretary John Mbadi said ahead of inking the deal.

Servicing of the SGR loans, which is done in January and July, is one of the biggest burdens on taxpayers, with repayments to China accounting for more than three-quarters of the annual spend on bilateral debt repayments.

The Treasury has a budget of Sh129.90 billion towards repayment of loans contracted from China this financial year ending June 2026, comprising Sh95.64 billion in principal and Sh34.26 billion in interest costs. The bulk of these repayments is for the SGR debt.

Kenya borrowed $5.08 billion from the China Export-Import Bank (Exim) for the construction of two phases of the SGR.

The first phase of the modern railway from the port city of Mombasa to Nairobi received two facilities of $1.6 billion and $2 billion, while the second, connecting the capital city to Suswa town near Naivasha, took up $1.48 billion.

The loans were dollar-denominated and had floating interest rates reportedly set at 3.6 percent or 3.0 percent above the average London Interbank Offered Rate (Libor) – a global benchmark retired in June 2023 and replaced by SOFR and other alternative reference rates.

Freight services were the main economic justification for the SGR loan. The SGR line has, however, struggled to hit targeted cargo volumes.

Some importers keen on last-mile delivery of cargo have balked at the tariffs to transport goods from the Port of Mombasa to the Inland Container Depot (ICD) in Nairobi and Suswa for consignment largely destined for western Kenya and neighbouring countries like Uganda and Rwanda.

‘Although the repayment of the SGR loans has been onerous, there should have been far greater concern about the railway’s inflated construction costs and its consistent failure to generate revenue despite government intervention to mandate cargo traffic,’ Fergus Kell, a research fellow at London-based Chatham House, wrote in a past note.

‘This is a legacy of poor Kenyan decision-making and a planning process driven more by short-term electioneering than strategic need. Chinese lending was one component of a surge in borrowing under the Kenyatta administration.’