The Kenya Bankers Association (KBA) has urged Kenya to overhaul its lending model to improve access to credit for ordinary people.
Speaking at the East Africa Banking School Conference (EABSC) 2026 on Tuesday, July 14, KBA Chairman Paul Russo said lenders should stop using collateral as their main basis for approving loans. He said collateral should still provide protection in lending, but it should not serve as the primary tool for judging borrowers, because it continues to exclude many small businesses from formal financing.
“While collateral will always have an important place in lending, it should not become the main decision tool to determine lending,” Russo stated. He added that Kenya’s dependence on collateral remains one of the biggest obstacles to credit access, especially for micro, small and medium-sized enterprises (MSMEs), which he said form the backbone of the economy.
Russo cited data from the Kenya National Bureau of Statistics (KNBS), noting that the country has more than 7.4 million MSMEs, but fewer than 20 per cent can access formal credit.
Consequently, most MSMEs struggle to fund their day-to-day operations and expansion through informal financing.
“According to KNBS, Kenya has over 7.4 million MSMEs, yet below 20 per cent can access common credit, leading the vast majority to depend on informal sources of finance,” Russo added.
In his proposal, Russo said banks and policymakers should strengthen alternative credit assessment methods that judge businesses by their cash-flow potential and repayment capacity, rather than by the value of pledged assets.
He also urged the introduction of additional credit de-risking mechanisms to encourage lenders to provide financing to viable businesses, even when they do not meet traditional collateral requirements.
