Category: Business Daily

A drop in deposit costs and lower loan defaults propelled stronger bank profit growth in the first half of 2026, offering continued boost after a period of expensive funding and elevated credit risk.

Nine of the country’s 11 banks listed on the Nairobi Securities Exchange, which have released their performance results for the six months ended June 2026, posted a combined Sh144.9 billion net profit, up 16.9 percent from Sh124 billion a year earlier.

The improvement comes as banks benefit from a more favourable operating environment in which interest rates have fallen, credit demand is recovering, and the cost of funding has declined faster than lending rates.

The Central Bank of Kenya (CBK) cut its benchmark Central Bank Rate to 8.75 percent in February and has maintained it at that level, down from 13 percent at the start of the monetary easing cycle in August 2024.

That shift is visible in the half-year numbers of KCB Group, Equity Group, Co-operative Bank of Kenya, NCBA, Absa Bank Kenya, Standard Chartered Bank Kenya, Diamond Trust Bank (DTB), Stanbic Holdings and Family Bank, which are the nine lenders used in this analysis.

Interest expenses for the nine lenders fell 7.2 percent to Sh111.6 billion as interest income rose 6.9 percent to Sh391.2 billion. Net interest income increased seven percent to Sh275.4 billion during the review period.

The recovery in asset quality has provided another lift. Gross non-performing loans across the nine banks fell 8.9 percent to Sh554.3 billion, with Equity, Absa and KCB recording some of the biggest reductions in the stock of bad loans.

Equity was the biggest beneficiary of the trend, lifting net profit 31.5 percent to Sh43.8 billion and contributing roughly half of the overall increase in profits among the banks analysed.

The lender’s gross non-performing loans (NPLs) fell 22.2 percent to Sh108.4 billion, while provisions for bad loans declined 11.6 percent.

Its NPL ratio improved to 9.5 percent from 13.7 percent last June following aggressive collection by the lender and what it termed ‘disciplined underwriting, improved analytics and a diversified portfolio.’

KCB, the second-largest profit generator, also combined stronger business with improved asset quality. Its profit rose 14 percent to Sh36.9 billion as gross NPLs fell 7.8 percent to Sh203.8 billion. Its NPL ratio improved to 15.1 percent from 18.7 percent.

‘NPLs improved as targeted resolution initiatives, including recoveries, rehabilitations, full and final settlements, government engagements on associated entities, and strategic write-offs, delivered positive outcomes,’ said KCB.

Co-op Bank and DTB posted some of the fastest profit growth during the half-year. Co-op’s earnings rose 28 percent to Sh18 billion as its NPL ratio improved to 13.9 percent from 17.2 percent, while DTB recorded a 34.1 percent jump to Sh6.4 billion.

However, the improvement in asset quality was not uniform, pointing to the uneven recovery across the banking industry given differences such as the type of clients.

Family Bank was the standout performer on profit growth, with earnings jumping 61.8 percent to Sh3.7 billion. However, its gross NPLs increased 19.2 percent to Sh18.1 billion, making it an outlier in an industry where bad loans generally fell. The rise in gross NPLs saw Family Bank step up provisions for loan defaults by 50.5 percent to Sh998.25 million.

The lender said several borrowers who fell into default due to the disruptions caused by the Covid-19 pandemic are yet to normalise repayments, thereby contributing to the stock of NPLs that drove the NPL ratio to 14.9 percent from 13.7 percent.

‘Our interest is not just to report good numbers. Our interest is also to protect the asset that we are entrusted with by our shareholders and the economy at large. We are very deliberate in ensuring that the required accounting standards are followed,’ Paul Ngaragari, chief finance officer at Family Bank, said.

DTB also recorded a six percent increase in gross NPLs, while that of NCBA rose 5.7 percent. The profit growth of the two lenders was influenced more by stronger lending income, lower funding costs and other revenue streams and less to do with falling stock of NPLs.

StanChart and Absa saw their net profits fall 16.8 percent and 9.8 percent respectively, making them outliers. Stanbic was another outlier, with profit edging up just 1.3 percent despite a 25 percent expansion in its loan book.

The disclosures of the nine lenders signal a sector moving from a defensive phase of managing expensive funding and elevated defaults towards renewed credit growth.

Private-sector credit growth accelerated to 10.6 percent in June, the fastest pace in 28 months, as lower lending rates improved demand from businesses and households.

More than 64,000 minority shareholders of Absa Kenya snubbed an offer from the lender’s top shareholder to buy part of their shares, scuttling the bid by the South African parent to increase its stake to as much as 85 percent.

Absa Group says it bought 189.38 million shares from the bank’s minority shareholders from the 895.9 million stocks the multinational had offered to purchase, representing a 21.1 percent subscription.

It got the shares, equivalent to a 3.49 percent stake in Absa Kenya, from 2,045 shareholders out of the 66,771 minority investors in the Kenyan bank.

Absa Group, which held around 68.5 percent of Absa Bank Kenya, offered Sh34.50 per share to buy stocks from minority investors in a transaction that was expected to lift its stake by up to 16.5 percent.

But 64,726 minority shareholders skipped the tender offer, leaving Sh24.4 billion of Sh30.8 billion of war chest that Absa has set aside for snapping the shares on the table.

Analysts linked the under-subscription to the surge in Absa’s share price at the Nairobi bourse, which narrowed the premium that the South African multinational had offered in the tender.

Absa stock opened trading at Sh29.20 at the Nairobi Securities Exchange (NSE) on June 19, the day its parent firm announced the tender offer, which closed on August 11.

The share stood at Sh33.65 on August 11 and closed trading at Sh34.40 on Wednesday.

‘The offer appears to have underperformed mainly because shareholders viewed the offer price of Sh34.5 as insufficient relative to Absa’s earnings potential, dividend track record and the stock’s recent price appreciation,’ argued James Kinya, research and global markets analyst at Rock Investment Bank.

‘Looking at the current share price, the premium appeared less compelling and thus minority investors had little incentive to give up future upside. Moreover, the offer also gave larger shareholders less certainty that all shares they tendered would be accepted, which may have further reduced their willingness to participate,’ added Mr Kinya.

The bank on Tuesday more than doubled its interim dividend to Sh0.50 per share despite reporting a 9.8 percent decline in net profit for the half year ended June 2026.

The lender reported a net profit of Sh10.5 billion in the half year to June, down from Sh11.6 billion posted in a similar period last year.

Its management attributed the profit drop to a lower interest rate regime, one-off costs and a slump in forex earnings.

Absa Group will earn Sh1.95 billion from the interim dividend for the 71.99 percent stake.

South African banks have been stepping up acquisitions in East Africa, filling a vacuum left by retreating European banks ?and riding a wave of increased continental trade and investments into energy and infrastructure.

South Africa’s slow growth and mature sector are pushing its biggest banks to expand elsewhere.

Nedbank agreed earlier this year to acquire a majority stake in Kenya’s NCBA, beating South African rival Standard Bank, which operates in Kenya as Stanbic, to the prize.

Kenya’s appeal lies in its gateway role to the East African Community, a fast growing bloc expanding by at least 5.0 percent a year.

Absa is likely to return to shareholders with an improved offer, having identified the acquisition as a key to widening its presence in the retail market.

In its offer document, the group also left open the option of acquiring additional shares through open market trades or a new, improved tender should the offer fail to hit its target.

‘Absa Group reserves the right, subject to obtaining any necessary approvals from the Capital Markets Authority (CMA) or any other relevant regulatory authorities…to launch one or more additional tender offers in relation to Absa Kenya, or otherwise to acquire additional shares through on-market transactions in Absa Kenya, following the close of the tender offer,’ Absa Group said in its tender offer document.

Should the bank exercise its right to approach Absa Kenya shareholders again for more shares, it would mirror the actions of rival South African lender Standard Bank when it acquired an additional 15 percent stake in Stanbic Kenya from 2018 at a cost of more than Sh5 billion.

Standard Bank launched its tender offer in May 2018, seeking an additional 59 million shares at a price of Sh95 apiece that would have raised its holding in Stanbic from 60 percent to 75 percent.

The offer failed to hit its target after getting an extra 8.01 percent at the closing period, raising ownership to 68 percent.

The bank later sought and obtained approval from the CMA to bridge the gap to 75 percent through open market share purchases.

It bought the additional shares over the next four years, ultimately hitting the 75 percent target in May 2022.

“Kenya is a strategically important market for Absa Group and remains central to our East Africa growth ambitions,” Charles Russon, Absa’s group executive for Africa ?regions, said earlier.

He added the proposal reflected confidence in the bank’s leadership, strategy and long-term growth prospects, as well as Absa’s commitment to supporting Kenya’s economy.

Absa Group, South Africa’s third-biggest lender by assets, said it intends to maintain Absa Kenya’s listing on ?the NSE after the transaction.

The group added it does not plan to alter the bank’s business strategy, management team, staffing levels or day-to-day operations.

Absa’s Africa Regions ?business contributed 31 percent to group headline earnings in 2025.

That same year, Kenya contributed about 19 percent of the profits in the Africa regions portfolio.

Vivo Energy accounted for nearly a quarter of the Sh278.6 billion in taxes and levies that oil marketers paid in the 10 months to April 2026, even as the overall fuel tax collections dipped because of a lowered Value Added Tax (VAT) rate on petroleum products.

An analysis shows that Vivo paid Sh64.28 billion to the Kenya Revenue Authority (KRA) in the period, or 23 percent of the total levies and taxes paid by all oil marketers.

Vivo’s tax payments reflect its fuel sales that accounted for 23.2 percent of the 4,269,742,780 litres of diesel, petrol and dual-purpose kerosene sold in Kenya in the period under review.

Tax collections in the period could have been higher had the State not halved VAT on fuel to eight percent in April 2026 to curb a sharp rise in pump prices in the wake of the Middle East conflict.

TotalEnergies Marketing Kenya and Rubis Kenya paid Sh36.4 billion and Sh25.13 billion respectively in taxes and levies in the period, reflecting their status as the second and third biggest sellers of fuel in the period.

‘Impact of reduction of VAT rate from 16 percent to 13 percent and eight percent was a reduction in VAT collections by Sh1.827 billion for April 2026 for PMS (petrol) and diesel,’ KRA says in confidential documents.

Kenya lowered VAT in April in a bid to ease the tax component on fuel to cushion consumers after global prices of refined fuel skyrocketed in the wake of the US-Israel attacks on Iran.

The VAT rate was earlier planned to revert to 16 percent on July 14 but has since been extended to October 14.

There are seven levies and two taxes charged per litre of fuel sold locally, with the biggest of these being the Roads Maintenance Levy (RML) of Sh25 for every litre of diesel and petrol sold.

Oil marketers pay the taxes upfront before being cleared to evacuate their fuel quotas from the storage network of Kenya Pipeline Company.

Besides VAT and RML, the others are excise duty, Petroleum Development Levy of Sh5.40 per litre of diesel and petrol and Sh0.40 on each litre of kerosene, Petroleum Regulatory Levy, Merchant Shipping Levy, Import Declaration Fee and

There is also the Anti-adulteration Levy of Sh18 per litre of kerosene and Railway Development Levy, which is charged on diesel, petrol and kerosene. Fuel is one of the biggest contributors to VAT for KRA,

Vivo, Total and Rubis accounted for a combined 45.17 percent of the taxes and levies that oil marketers paid to KRA in the 10 months, reflecting their dominance in the local market.

The three control nearly half of the fuel sales in Kenya, with Vivo being the biggest, followed by TotalEnergies, while Rubis is third.

Total and Rubis sold 554,054,540 litres and 386,766,360 litres of fuel, respectively, in the 10 months to April this year, with their combined sales being less than the 992,239.71 litres that Vivo sold in the period.

Vivo is the seller of Shell-branded petroleum products locally. It began selling them in 2012, the same year it was founded after the acquisition of Shell’s downstream business in Kenya.

Individual investors have spent an average of Sh4,818 to buy shares through the new M-Pesa platform known as Ziidi trader, reflecting the influence of the mobile money service in bringing small traders to the Nairobi Securities Exchange (NSE).

New data show that the average ticket size on the M-Pesa backed application has nearly doubled since launch in March from Sh2, 872.

The sale and purchase of stocks directly via M-Pesa marks the first-time investors are transacting in shares without going through stockbrokers.

Nearly one million individual investors have opted into the Ziidi Trader since launching five months ago, but the number of active traders has remained at below 150,000.

Backers of the application have attributed the lower number of active traders to gaps in investor education where most individuals are yet to buy into the Nairobi bourse having formed no choice on the counters to purchase from, rather than the lack of market access.

They are banking on instruments like exchange traded funds (ETFs) to result in more conversions to trading by presenting investors with a basket of diversified stocks, negating the need for retail investors to pick individual stocks.

The Nairobi Securities Exchange (NSE) currently has two ETF listings-Absa New Gold and the Satrix World Feeder, while an additional listing of the Wall Street Africa (WSA) Banking Index ETF is set for the fourth quarter of this year.

‘We’ve learnt that, even if you give somebody a Lamborghini but there are no roads to drive on, the person won’t drive,’ said Eric Ruenji, founder and Chairman of Theo Capital Holdings.

‘People want to invest but don’t know what to invest in. It’s no longer about having market access. We want to get people who have opted in to become traders without having to think about it too much, even if it’s buying just one unit.’

The Ziidi Trader has consistently handled the bulk of shares orders at the NSE since launching and has averaged 54 percent in the period.

The turnover or value of shares traded via the mobile-only platform has however remained muted at around two percent.

Individual investors on the M-Pesa shares trading platform have also been net buyers of shares at the NSE, putting in orders of 566, 000 compared to 265,000 for sales.

This indicates that retail investors are buying and holding shares, supporting long-term capital formation.

The Ziidi Trader is a mobile-based shares trading platform, jointly offered by Safaricom, the NSE and Kestrel Capital.

It enables customers to buy and sell NSE-listed shares and corporate bonds directly from their mobile-phones, monitor portfolios and access market insights digitally.

Safaricom has credited the platform with expanding access to capital markets, with the trading app having played a key role in the recently concluded Kenya Pipeline Company (KPC) initial public offer.

Seventy-three thousand individuals participated in the IPO where 36,000 of them placed orders through the M-Pesa platform.

‘The launch of Ziidi Trader marked an important milestone, broadening access to capital markets and demonstrating early traction as a new driver of financial deepening and inclusion,’ the company said in May.

At the time, the telecoms operator revealed 84,000 small investors as active traders on the platform and 511,000 sign-ups/opt-ins.

M-Pesa users can leverage the platform to directly buy shares on the NSE without opening a traditional brokerage account.

The system relies on existing M-Pesa know-your-customer credentials and PIN authentication, eliminating the need for new account creation.

Shares purchased through Ziidi are held in a single omnibus account managed by Kestrel Capital, which executes trades on behalf of users.

The NSE is betting on the platform to grow retail participation to as many as nine million investors by the end of December 2029.

National carrier Kenya Airways (KQ) owed the Kenya Civil Aviation Authority (KCAA) Sh1.5billion in unpaid service fees as at the end of the financial year to June 2025, which is more than half the cumulative debt to the regulator by airlines, new disclosures show.

The latest disclosures by the regulator show that it was owed Sh2.3 billion in unpaid fees by different air operators, of which KQ’s debt accounts for 65 percent. The national carrier also accounts for nearly 90 percent of the amount owed by domestic operators, making it a significant credit risk for KCAA.

KCAA said that part of KQ’s debt has been outstanding for more than two years, and it has been engaging the airline to recover the unpaid fees.

‘The Authority has significant concentration of credit risk on amounts due from Kenya Airways plc… The Authority has continued to engage Kenya Airways to settle the outstanding debt,’ KCAA said in a disclosure.

In her audit of KCAA books for the period, Auditor-General Nancy Gathungu questioned the recoverability of the debt owed by KQ to the regulator, given the age and size of the outstanding balance.

‘The recoverability of the long outstanding balance is doubtful,’ said Ms Gathungu.

The unpaid fees include charges for renewal of air operator certificates, aircraft registration and certification, flight operations and airworthiness oversight, passenger-related charges, as well as other regulatory fees relating to pilots, engineers and aircraft operations.

The size of the arrears leaves KCAA with significant exposure to KQ’s financial challenges, raising questions over how the regulator will recover the money as KQ continues with efforts to strengthen its balance sheet.

KQ’s debt and payables have been increasing amid mounting cash flow challenges, with revenue affected by constrained capacity due to grounded aircraft caused by a global shortage of airline parts.

In the year to December 2025, its current liabilities grew by about Sh10 billion to Sh62.6 billion, including Sh29.4 billion in accrued expenses, which rose from Sh24.8 billion the previous year.

Mary Mwenga, KQ’s Chief Financial Officer, said the carrier has already crafted a plan to clear the outstanding debt to the regulator. She did not give timelines for the payment plan.

‘We have strong and continuous, constant engagement with KCAA, and as far as I’m concerned, we’ve honoured those payment plans, and we’re good with KCAA,’ Ms Mwenga said.

The airline has been seeking fresh capital to support its turnaround and strengthen its balance sheet, with the government looking to bring in a strategic investor. The government is separately moving to clean up KQ’s balance sheet ahead of the planned investment.

Roads and Transport Cabinet Secretary Davies Chirchir last month said the government had ‘written off’ all of KQ’s historical debt, although he did not clarify whether the debt would include the Sh1.5 billion owed to KCAA.

The debt write-off is part of the government’s efforts to make the national carrier more attractive to investors, who are expected to inject capital into the airline and support its return to profitability.

Private hospitals are borrowing billions of shillings to buy MRI machines, dialysis units and other specialist equipment, as banks build a fast-growing lending business around the country’s push into advanced healthcare.

As they expand into oncology, cardiology, renal care, fertility, and advanced diagnostics, private hospitals, faith-based facilities, clinics, and diagnostic centres are turning to bank loans to acquire MRI machines, dialysis units, linear accelerators, mammography machines, and other specialised equipment.

Equity Bank alone has lent about Sh33 billion to the healthcare sector over the past five years, channelling Sh11.5 billion of it for medical equipment, as private hospitals, faith-based facilities and diagnostic centres turn to asset finance rather than wait to save up the cash.

‘This product was developed to address the financing gap in acquiring medical equipment and to support healthcare providers in enhancing service delivery and expanding access to quality healthcare services,’ Joseph Mbai, the General Manager and Team Leader for the Health Sector at Equity Bank, told the Business Daily.

The need for capital is particularly acute in Kenya, where significant gaps in access to specialised equipment persist. The country has around 50 MRI scanners, most of which are concentrated in Nairobi and a few other major centres.

This uneven distribution leaves many parts of the country dependent on facilities outside their regions for advanced imaging, therefore creating a financing market around medical equipment.

‘We have recently financed 30 renal dialysis units, two MRIs, one piece of cardiology equipment, two linear accelerators, one genetic sequencer and one mammogram machine,’ said Dr Mbai.

This equipment enables private facilities to expand their services beyond general medical care to include those that require significant investment in machinery.

For example, a dialysis unit enables a hospital to provide renal treatment, and a linear accelerator allows it to develop radiotherapy services. An MRI machine enables a facility to perform imaging scans on patients within its network instead of referring them elsewhere.

The increased investment in equipment purchases and upgrades is partly driven by demand for specialist treatment in Kenya, as well as the country’s emergence as a regional healthcare destination.

This shift is encouraging hospitals to invest in specialised services such as oncology, renal care, cardiology, imaging, laboratory diagnostics, fertility, ENT and orthopaedics, thereby keeping patients at home instead of sending them abroad for treatment.

Apart from Equity Bank, other lenders have also developed similar products as hospitals seek ways to acquire equipment without bearing the full cost upfront.

The Co-operative Bank has a dedicated healthcare proposition that finances or leases equipment such as MRI and X-ray machines, as well as surgical tools. Its healthcare offering also includes working capital lines and payment collection tools designed for hospitals, clinics, and diagnostic centres.

The bank’s Africa Medical Equipment Facility (AMEF), which was developed in partnership with the International Finance Corporation (IFC), GE Healthcare, Philips Healthcare and KARL STORZ, provides financing for clinics, hospitals, medical imaging centres and laboratories. Under the facility, individual healthcare providers can access loans and leases ranging from $5,000 (Sh645,000) to $2 million (Sh258 million).

‘This partnership with the IFC and Philips will enable the Co-operative Bank to extend credit to a wider range of investors in the healthcare sector,’ said Gideon Muriuki, the bank’s Group Managing Director and Chief Executive Officer, at the launch of the product.

For smaller hospitals and diagnostic centres, the facility provides an alternative to funding the full purchase price of equipment from their own cash reserves.

Meanwhile, I and M Bank entered this market in 2019 with a product initially aimed at its premium banking clients, covering X-ray, dialysis, theatre, ICU, ultrasound, radiology, sterilisation and laboratory equipment.

‘We believe that this financing will help our customers in the healthcare industry accelerate their business growth while contributing to universal healthcare,’ said the lender during the launch.

Customers financed under the product also receive discounted all-risk insurance cover for the equipment through I and M Insurance Agency, as well as insurance premium financing, which spreads lump-sum premiums into monthly instalments.

In May 2026, Absa Bank Kenya moved deeper into the market when it relaunched its asset financing arm with a Sh100 billion financing capacity over three years. Medical equipment for hospitals, clinics, and laboratories was named as one of its priority categories.

While these financing products enable hospitals to acquire equipment without first accumulating the full purchase price, they also create a repayment obligation dependent on the equipment generating sufficient income.

Kenya is hoping to unlock up to Sh151.2 billion from the World Bank Group in the current 2026/2027 fiscal year as the multilateral lender remains the country’s primary source of external financing in the absence of the International Monetary Fund (IMF).

A debt plan by the National Treasury for 2026 shows that Kenya expects funding from three World Bank support schemes, including: Sh94.2 billion from the Development Policy Operations (DPO), Sh52 billion from the Rapid Response Option (RRO), and Sh5 billion from the programme-for-results (PforR) window.

The DPO scheme provides vital budget support tied to institutional and policy reforms. It helps to ease heavy public debt pressures and fiscal deficits by funding governance, accountability, and social protection.

The RRO is a fast-disbursing mechanism which allows enrolled countries to immediately use up to 10percent of their undisbursed project financing balances to address emergency economic shocks such as disruptions caused by surging fuel and fertiliser prices.

PforR financing focuses on fund disbursement directly to the delivery of specific, verifiable program results. It helps countries improve public sector performance, build institutional capacity, and enhance transparency by releasing money only when agreed-upon milestones are met.

Kenya will be required to meet specific socio-economic outcomes to unlock funding under the DPO option, which will cover the final tranche of a three-part series first agreed upon in 2024.

Additionally, the country is obligated to disclose planned emergency spending to access Sh52 billion ($400 million) from the emergency RRO window, even as Kenya is widely expected to use the resources to mitigate the impact of flooding from the expected El Niño-induced rainfall from October this year.

Funding under the RRO is also subject to other legal and regulatory requirements.

‘Notwithstanding the foregoing, the government may also consider other external financing options, subject to the applicable legal, regulatory and policy requirements including the Rapid Response Option,’ the National Treasury said in its annual borrowing plan.

The World Bank has set more than 10 conditions to unlock the next Sh94.2 billion ($725 million) DPO tranche, including the disclosure of the personal interests of public officials and the publication of regulations to restrict unsolicited public-private partnerships deals, such as the flopped proposal by the Adani Group to upgrade the Jomo Kenyatta International Airport.

The World Bank approved the disbursement of Sh97 billion ($750 million) from the second tranche of the DPO at the end of June, after it disbursed Sh155 billion ($1.2 billion) in June 2024.

To secure the next disbursement, Kenya faces a series of demands from the World Bank.

Kenya must enact the proposed Whistleblower Protection Act, which seeks to ensure fair competition, value for money, and improved detection of misused funds.

The adoption of the law is expected to anchor declarations of personal interests by public officials, reviewed and verified by the responsible commissions, from a baseline of zero to 85 percent by 2028.

Kenya is also expected to amend the Companies Act of 2015 to align the beneficial ownership registry with updated Financial Action Task Force (FATF) standards. FATF is an intergovernmental agency that leads global action to tackle money laundering and terrorist financing.

The multilateral also requires changes to the Public Finance Management Act to ensure that any budget adjustments during implementation are strictly aligned with the fiscal aggregates approved by Parliament.

Kenya must also consolidate human resources and payroll data for all ministries, departments and agencies, counties, non-commercial State corporations, commissions and independent offices.

The first set of conditions for the third DPO seeks to improve the efficiency, transparency and equity of public finance, while the second aims to foster competitive and inclusive product and labour markets.

The final set of conditions focuses on strengthening climate action and includes the enactment of the Railways Bill, as well as regulations for the urban transport policy and the e-mobility policy.

Kenya previously requested emergency funding support from the World Bank under the RRO to mitigate the impact of the US war on Iran, but the country failed to detail its spending plans from the disbursement, causing a delay in financing.

The country has since identified the impending El Niño-driven heavy rains and flooding as a key economic risk in 2026 in its pitch for emergency funding from the World Bank.

‘Yes, the government did request the RRO and has gone through the process of signing up for the option. We are currently in the process of figuring out exactly what expenditures the government would like to support during the time of crisis,’ Anne Bakilana, an operations manager at World Bank Kenya, said last month.

‘The vehicle created (to support emergency expenditures) can last up to a year and can finance any emergency that would happen during that period, including health sector emergencies, pandemics and flood emergencies.’

The World Bank is set to remain the key source of external concessional financing over the medium term as Kenya remains in protracted discussions with the IMF for a new funded programme.

Kenya has not budgeted for any new financing from the IMF up to at least June 2030 as it manages expectations of accessing monies from the fund but expects continued access to the World Bank’s DPO facility.

The country is set to continue its push for a new IMF facility shortly as the fund begins to assess the economy’s health under Article IV consultations.

Equity Group Holdings has acquired an asset management license, joining a growing list of banks seeking to lock in customer deposits through investment in high-earning schemes.

The lender disclosed that it was setting up a stand-alone asset management unit to woo customers seeking higher returns than those offered for fixed deposit accounts.

‘We are working on setting up asset management because we have read the market. The market in the past has relied on banks’ savings accounts, but it looks like now the market wants high-earning assets as opposed to savings,’ Equity Group chief executive James Mwangi said.

‘We’ve obtained a license for asset management, and we think it will be a formidable business, given the brand of Equity, the infrastructure for distributing assets and the IT backbone that we have and our ability to distribute assets that are manufactured even globally,’ he added.

This will be a departure from the current group structure where its collective investment schemes(CIS) are operated under its subsidiary, Equity Investment Bank.

A CIS-commonly known as a unit trust or mutual fund-pools money from many people to buy a shared portfolio of assets such as stocks, bonds, and bank deposits. The funds are managed on behalf of investors by a professional fund manager.

Equity joins other lenders such as Absa Bank, Standard Chartered Kenya, Ecobank Kenya, KCB and I and M Group that have asset management units.

Commercial banks’ average return on savings accounts was 3.32 percent in June, as per the Central Bank of Kenya data, while fixed deposits were offering an average return of 6.84 percent.

Banks usually have a minimum amount for fixed deposits, whose rate is negotiated based on the amount and duration the customer locks the savings with the bank.

Money market funds, which invest primarily in Treasury bills and commercial bank fixed deposits, are offering an average annual return of 8.4 percent, which is lower than that offered by riskier equity funds and special funds. Equity’s unit trust is offering an annual return of 5.22 percent under its money market fund.

The higher returns offered by the collective investment schemes have seen bank customers withdraw savings held in commercial banks to invest with special funds in a move likely to push up the cost of funds for the lenders.

Total assets under management held by the special funds and the money market funds stood at Sh851.7 billion as at the end of March this year, being a 12.6 percent growth from Sh756.3 billion in December 2025, according to the Capital Markets Authority.

Deposits held by commercial banks grew at a slower pace of 3.8 percent over the same three-month period to Sh6.5 trillion.

Commercial banks that have gone into asset management have recorded growth from their units, signalling opportunities for the lenders.

Absa Bank reported a 40 percent growth in its assets under management portfolio to Sh49 billion in the 12 months to June this year.

Assets under Management will provide Equity Group with additional revenue streams from non-banking activities, which include insurance, investment banking and fintech.

From the Mt Ololokwe summit, the vast Samburu landscape stretches into the horizon, its rugged plains and distant hills offering the kind of scenery that draws tourists for sunrise and sunset splendour.

On Wednesday morning, six tourists climbed into a helicopter to experience that view. They were filming and taking photographs when their holiday turned into a tragedy.

The helicopter had barely completed its third sweep over the summit when the tourists began capturing what would become their final images of the spectacular mountain . Moments later, the helicopter crashed down the rocky face, killing all seven people on board, including the pilot. The six tourists had been flown from Suiyan in Loisaba Conservancy, Laikipia County.

The World Bank has cautioned commercial banks in Kenya on the growing sovereign debt risk due to heavy investments in government securities, which have risen by about Sh150 billion in the last six months.

Sovereign debt is borrowing by a national government, usually through bonds, bills, or loans, to fund public investment and support the economy. Sovereign debt could carry the risk that a government may default on its financial obligations, like bonds, or impose regulations that negatively affect foreign exchange agreements.

The multilateral lender says the exposure of banks in Kenya to government securities remains high, with the lenders holding approximately Sh2.2 trillion in government securities, which is equivalent to about 35 percent of domestic debt and about 27 percent of total banking sector assets.

‘Kenya’s banking sector remains broadly stable, supported by strong liquidity and capital buffers. However, asset quality remains a key vulnerability, and the gross non-performing loan to gross loans ratio reached 15.6 percent in March 2026,’ the bank says in its latest economic update report for Kenya.

‘Exposure to government securities remains elevated, with commercial banks holding approximately Sh2.2 trillion in government securities, equivalent to roughly 35 percent of domestic debt and about 27 percent of total banking sector assets.’

Central bank data shows that investment by banks in government securities has increased by about Sh150 billion from Sh2.41 trillion in the week ending January 23, 2026 to Sh2.56 trillion in the week ending August 7, 2026.

Rating agency Fitch said last year Kenya’s banking sector’s performance would remain tempered by significant sovereign exposure via investments in securities.

Banks are usually significant holders and traders of local debt, which covers proceeds raised from Treasury Bills and Bonds auctions.

The Kenya Bankers Association, the banking industry’s lobby, says banks hold about 30 percent of their assets in government securities as part of diversifying their portfolios over time.

‘We are not worried at all since there is confidence in the Government’s efforts to ensure public debt sustainability,’ said Raimond Molenje, the association’s chief executive.

‘Any decision to adjust investments in Government securities is made at a bank level based on each bank’s risk appetite and adopted asset structure.’

Data from the National Treasury shows that total public debt increased to Sh13.01 trillion as at the end of June 2026, representing 68.5 percent of the gross domestic product (GDP) from Sh11.81 trillion (67.8 percent) as at the end of June 2025.

Of the Sh13.01 trillion debt, domestic and external debts amounted to Sh7.32 trillion (38.6 percent of GDP), and external debt stock was Sh5.68 trillion (29.9 percent of GDP), respectively.

The 2025 Debt Sustainability Analysis undertaken jointly by the National Treasury indicates that Kenya’s public debt remains sustainable but with high risk of debt distress.

Treasury, however, says the country’s external liquidity has strengthened, reflected in higher foreign exchange reserves, a narrower current account deficit, and a more stable exchange rate.

‘These developments have eased balance of payments pressures. The recent Eurobond liability management operations have contributed to smoother debt amortization and supported private sector credit growth, against the backdrop of improving macroeconomic and civil stability,’ it says.

‘These measures have helped to position the country more favourably to international lenders and investors.’

Kenya remains active in the debt market amid shortfalls in revenue collection. For instance, a debt plan by the National Treasury for 2026 shows that Kenya expects funding from three World Bank support schemes, including: Sh94.2 billion from the Development Policy Operations (DPO), Sh52 billion from the Rapid Response Option (RRO), and Sh5 billion from the programme-for-results (PforR) window.

The DPO scheme provides vital budget support tied to institutional and policy reforms. It helps to ease heavy public debt pressures and fiscal deficits by funding governance, accountability, and social protection.

The RRO is a fast-disbursing mechanism which allows enrolled countries to immediately use up to 10percent of their undisbursed project financing balances to address emergency economic shocks such as disruptions caused by surging fuel and fertiliser prices.

PforR financing focuses on fund disbursement directly to the delivery of specific, verifiable programme results. It helps countries improve public sector performance, build institutional capacity, and enhance transparency by releasing money only when agreed-upon milestones are met.