Kenyan Banks Redirect Billions From Logistics To Construction Sector

Kenyan commercial banks placed their biggest bets on construction projects in the year to April, while quietly pulling billions of shillings out of logistics and communications lending, according to the latest Central Bank of Kenya data.

Outstanding loans to the private sector rose 6.3 percent, or Sh386.3 billion, to Sh6.48 trillion in April, reversing a 1.3 percent decline recorded a year earlier as lending recovered following interest rate cuts by the central bank.

That recovery followed easing borrowing costs, with the weighted average lending rate charged by commercial banks falling to 14.38 percent in June, down from a recent peak of 17.22 percent in November 2024. The decline ended nearly three years of rising rates that had climbed from 12.12 percent at the start of 2022.

Equity Bank Group chief executive James Mwangi described 2025 as a defensive year focused on optimisation rather than growth, telling reporters in March that loan books had since shifted toward expansion.

Loans to the building and construction sector grew fastest of any category, jumping 32.1 percent, or Sh48.7 billion, to Sh200.6 billion. Credit to transport and communications businesses fell by the sharpest rate of any sector, dropping 9.6 percent, or Sh34 billion, to Sh320.4 billion, extending a second consecutive annual decline.

The shift toward construction follows President William Ruto's administration restarting hundreds of road projects that had stalled under an estimated Sh650 billion backlog of unpaid contractor bills. More than 500 road projects resumed from 2025 after the Roads ministry negotiated a return-to-work arrangement backed by an initial Sh123 billion payment.

Kenya National Bureau of Statistics data shows the construction sector expanded 6.6 percent in the first quarter, up from 4.5 percent a year earlier, driven by a 17.9 percent rise in cement consumption alongside higher imports of bitumen, iron and steel.

Despite improving operating indicators in transport, including rising Mombasa port cargo volumes, nearly 10 percent higher diesel consumption and double-digit growth in Standard Gauge Railway traffic, banks remained cautious about extending fresh credit to the sector, pointing to concerns over profitability or leverage rather than current activity.

Credit to manufacturing also continued declining, falling 3.4 percent to Sh573.5 billion, marking a second consecutive annual drop. Other sectors recording credit growth included agriculture, up 23.5 percent to Sh190.2 billion, finance and insurance, up 20.7 percent to Sh178.7 billion, and wholesale and retail trade, up 9.3 percent to Sh749.6 billion.