2025 Kenya Microfinance Industry Report

Overview of the Report

Theme: “Adapting to Economic Pressures and Evolving Market Needs”

The Kenya Microfinance Industry (“the Industry”) continues to play a vital role in providing financial services to individuals, small businesses and underserved communities, particularly in rural and informal sectors. With formal financial inclusion reaching 84.8% in 2024, microfinance institutions remain central to expanding access to affordable credit for groups excluded from traditional banking. The Industry faced significant headwinds, particularly for Microfinance Banks (MFBs), whose total assets declined by 5.1% year-on-year to Kshs 60.9 billion in 2024, driven by subdued lending activity and intensified competition from commercial banks and digital lenders. While lending remains the core business for MFBs, gross earnings fell by 5% reflecting rising funding costs and cautious lending activity. The Credit-Only Microfinance Institutions (COMFIs) segment continues to register positive growth across all key metrics evidencing the attractiveness of the segment as well as the proliferation of lending using digital channels. A key turning point for the Industry was the implementation of the Business Laws (Amendment) Act, 2024, enacted on 27 December 2024, which mandates all non-deposit-taking credit providers (NDTCs) – including digital and traditional credit-only microfinance businesses – to register and obtain licenses from the Central Bank of Kenya (CBK) within six-month compliance to enhance sector oversight, improve lending standards and boost investor confidence. However, the cost of regulatory compliance is becoming a challenge as most MFIs were already struggling to meet the Digital Credit Providers (DCP) licensing requirements of the CBK just two years earlier. Looking ahead, the Industry’s growth is expected to come from capital infusions from strategic investors, increased adoption of digital lending infrastructure and rising micro, small and medium enterprises (MSME) credit demand. Nonetheless, short-term pressures – elevated impairments, funding constraints and earnings compression – will persist before giving way to a more resilient and regulated microfinance ecosystem.

Key excerpts from the 2025 Kenya Microfinance Industry Report.

• Asset quality remains a key challenge for the Industry marked by elevated credit risks stemming from a strained macroeconomic environment, business disruptions due to anti-Finance Bill protests and weakened borrower repayment capacity – particularly among SMEs and low-income groups.
• Continued rising costs of complying with new regulations such as the Digital Credit Providers Regulations and the Data Protection Act as well as the new NDTCs remain a challenge.
• Microfinance institutions are increasingly adopting green loan products and eco-friendly practices, supported by developmental partners through training and mentorship, with a focus on sustainability areas like agriculture, energy and waste management to drive long-term community and environmental impact.
• With 9.9% of Kenyan adults still formally financially excluded – of which 45.5% are rural youth – microfinance institutions that develop flexible, low-ticket and accessible products stand to gain significantly by expanding outreach to these underserved segments.