Outstanding loans from past government on-lending programmes continue to surface in Kenya’s public debt disclosures, with Equity Bank and Co-operative Bank of Kenya jointly owing the State Sh457 million as of the end of June 2025.
According to Treasury debt data, the exposure relates to legacy schemes under which the government advanced funds to commercial banks for onward lending to targeted groups, particularly smallholder farmers. Treasury records show that a total of Sh784 million was disbursed to the two tier-one lenders over several years, but only Sh327 million had been repaid by the close of the last financial year.
This leaves Co-operative Bank with an outstanding balance of Sh267 million out of the Sh339 million it received, while Equity Bank still owes Sh190 million from Sh445 million channelled through its network. A senior bank official cited in the disclosures said the exposure stems from “an old government kitty meant to support smallholder farmers across subsectors such as cotton, irrigation, pyrethrum, and dairy,” with banks tasked with collecting repayments and remitting them to the Treasury.
The arrears have persisted largely due to weak repayment rates and the age of the loans, many of which date back to the late 1980s. As a result, the balances have lingered long after the original programmes collapsed and now reappear periodically in fiscal reports, despite having little connection to current lending activity.
The situation contrasts with similar historical arrangements previously held by Faulu Microfinance Bank and Kenya Women Microfinance Bank (KWFT), whose combined Sh477 million exposure under comparable schemes was either fully repaid or written off by the end of the financial year ending June 2023, leaving no outstanding balances.
While the bank-related arrears are relatively small in absolute terms, they sit within a much larger public finance challenge. Treasury’s Management Report shows that the cumulative stock of on-lent and direct government loans—mainly to strategic parastatals—stood at Sh1.05 trillion by end-June 2025.
Kenya Railways Corporation alone accounted for about 52 percent of this amount, or Sh547.38 billion. During the year, repayments across all entities totalled Sh76.93 billion, representing just 7.32 percent of the total outstanding stock, underlining the slow pace of recovery on government-backed lending.
