Nairobi — More Kenyan companies are turning to internal financing to fund operations and expansion projects amid high borrowing costs and tight lending conditions, a new Central Bank of Kenya (CBK) survey shows.
According to the September 2025 CEOs Survey, most firms are using their own resources as the primary source of funding, with bank loans playing a secondary role despite a slight drop in lending rates since August 2024.
The report attributes the trend to cautious lending, strict collateral demands, and lengthy loan approval processes that continue to lock out small and medium-sized enterprises (SMEs).
"Firms continue to rely more on internally generated funds than on external borrowing due to the high credit cost environment," the CBK noted, adding that banks remain risk-averse despite lower policy rates.
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While many executives acknowledged a 1-2 percent decline in loan rates, access to credit remains moderate, with banks still viewing SMEs as high-risk borrowers.
Technology Driving Growth
The survey found that 78 percent of firms have adopted technology and automated key operations in the past year, marking a major leap in efficiency.
Businesses cited automation in customer service, accounting, and compliance as crucial for cost reduction and productivity gains.
However, high installation costs, limited digital skills, and cybersecurity threats continue to hinder full adoption. The ICT, manufacturing, and financial sectors were identified as leaders in digital transformation.
Positive Outlook
Despite funding constraints, business leaders remain optimistic about 2026, expecting improved performance driven by innovation, market expansion, and efficiency gains.
The agriculture, manufacturing, and ICT sectors are forecast to lead growth, supported by favorable weather, automation, and stronger consumer activity.
Still, high operational costs, weak demand, and global trade uncertainties could slow momentum.
The CBK concludes that Kenya's private sector is adapting through innovation and self-financing, but easing credit access and cutting business costs will be key to sustaining growth.
