Kenyan banks are facing a challenging time as they intensify their efforts to recover loans from defaulters, signaling a departure from the leniency shown during the pandemic. With household debt stress deepening, more than 30 lenders are now focusing on collecting overdue personal and household loans, an area identified by the Central Bank of Kenya as highly susceptible to increased defaults in the coming months.
In a recent Credit Officer Survey involving 39 banks, 33% expressed concerns about the rise in non-performing loans (NPLs) specifically in the personal and household segment from April to June 2025. This shift towards stricter loan recovery measures is not due to liquidity issues but rather reflects a heightened risk aversion and regulatory pressure to clean up their loan portfolios.
“The current phase of credit tightening is driven by a need to mitigate risks and comply with regulatory standards, rather than solely focusing on financial liquidity,”
explained industry experts. Borrowers in the personal and household category are already feeling the impact of this change, with reports of recovery agents contacting individuals to demand repayment on long-overdue loans.
Despite regulations that halt interest accumulation after a certain period, outstanding debts continue to burden borrowers, affecting their financial stability and peace of mind. The recent shift towards automatically deducting loan repayments from accounts has caught many off guard, forcing them to navigate financial uncertainties and prioritize debt payments over essential expenses.
The lack of clear communication and detailed breakdowns of outstanding debts exacerbates the situation, leaving borrowers confused and anxious about their financial obligations. While some banks have outsourced debt collection efforts to agencies, this has led to further discrepancies in the information provided to borrowers, increasing the frustration and distrust between them and financial institutions.
“The transition from leniency to enforcement has left many borrowers feeling overwhelmed and unsure about their financial standing,”
remarked a financial analyst. As recovery teams become more active and debt collection agencies ramp up their efforts, borrowers are realizing that ignoring old loans is no longer an option.
Digital lenders have also joined the pursuit of loan repayments, offering incentives and limited-time deals to incentivize borrowers to settle their debts promptly. This strategy, aimed at reducing risky assets, underscores the industry’s focus on asset quality and compliance amidst a challenging economic environment.
Major banks in Kenya, including Equity Bank, Kenya Commercial Bank (KCB), NCBA Bank of Kenya, and I&M Bank, have intensified their recovery strategies across various sectors to protect their asset quality. This renewed focus on loan recovery comes at a time when credit demand remains subdued, and lenders prioritize risk management and compliance over aggressive loan growth.
The implications of these stringent recovery efforts extend beyond individual borrowers, impacting the broader economy and financial inclusion. The tightening credit environment, coupled with regulatory requirements like IFRS 9, has restricted access to credit for many individuals, particularly those in the informal sector or without collateral.
“Financial literacy plays a crucial role in navigating the borrowing landscape, and individuals are encouraged to borrow for investment rather than consumption,”
highlighted industry experts. While digital credit has provided access to funds for many Kenyans, misuse of these funds for non-productive purposes like betting has raised concerns about financial discipline and responsible borrowing practices.
As borrowers grapple with mounting debts, unclear repayment terms, and the looming threat of negative credit listings, the need for improved financial education and transparent lending practices becomes increasingly apparent. The challenges faced by borrowers in repaying loans underscore the importance of fostering a supportive financial ecosystem that empowers individuals to make informed borrowing decisions and manage their debts responsibly.
In conclusion, the intensified loan recovery efforts by Kenyan banks and digital lenders reflect a broader shift towards risk management and compliance in the financial sector. While these measures aim to safeguard asset quality and promote financial stability, they also highlight the importance of enhancing financial literacy, promoting responsible borrowing practices, and ensuring transparent communication between lenders and borrowers. As the financial landscape continues to evolve, fostering a culture of financial empowerment and accountability will be essential in building a resilient and inclusive financial system for all stakeholders.
