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Kenya’s banking sector is ramping up efforts to recover personal loans after defaults surged to a 20-year high in the first quarter of 2025.
A survey by the Central Bank of Kenya (CBK) shows that 84 percent of lenders plan to intensify recovery actions on personal and household loans in the second quarter, amid rising default risk driven by deepening economic pressure.
This proactive shift comes as the industry-wide non-performing loan (NPL) ratio climbed to 17.4 percent in Q1 2025, up from 16.4 percent at the end of 2024, marking the highest level since the early 2000s.
Personal and household loans are now the most problematic segment within Kenya’s credit market, with nearly 40 percent of banks anticipating further deterioration in this category.
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Nicholas Mworia, a banking sector analyst, observed, “The surge in NPLs is a clear signal that households are under distress. Lenders have no choice but to step up recovery to protect their portfolios.”
The intensified focus on personal loan recovery reflects a broader tightening of risk management strategies as banks adjust to macroeconomic headwinds like inflation and cost-of-living challenges.
CBK’s findings come at a time when consumer lending continues to be a major focus for banks seeking to reduce credit risk and strengthen balance sheet health.
As part of the recovery push, lenders are deploying a mix of digital collections, loan restructuring, and enforcement measures to address rising defaults since elevated NPL levels could erode profitability and constrain credit availability to households and small businesses.
