In 2025 Kenya's banks earned KES 287.2 billion in interest from lending to the government. They earned KES 500.4 billion from lending to everyone else.
So no, the government is not yet the bigger customer. But it is the faster-growing one. At one of the three biggest banks, the government pays three shillings in interest for every four that borrowers pay.
The Afronomics verdict: Kenya's banks still earn more from lending to you than to the government, but in 2025 they grew their government holdings almost three times as fast as their loans: sensible for a bank while the state pays this well, and costly for an economy that needs credit.
What happened
FactsThe Central Bank of Kenya's Bank Supervision Annual Report 2025 shows the banking sector's balance sheet at 31 December 2025. Banks held KES 2,499.3 billion of government securities, up from KES 2,114.8 billion a year earlier. Net loans and advances stood at KES 3,881.9 billion, up from KES 3,641.4 billion. Government securities were 29.9% of the sector's total assets; loans were 46.5%.
FactsThe CBK says government securities rose by KES 384.5 billion (18.2%) in 2025 and loans and advances by KES 240.5 billion (6.6%).
FactsOn the income side, interest on government securities rose from KES 262.3 billion in 2024 to KES 287.2 billion in 2025, from 24.9% to 27.8% of the sector's total income. Interest on advances fell from KES 540.9 billion to KES 500.4 billion, from 51.3% to 48.4%. Total income was KES 1,032.9 billion. Profit before tax rose to KES 306.3 billion from KES 260.3 billion.
FactsLending to the private sector grew 5.9% in December 2025, up from minus 2.9% in January 2025, according to the same report. The CBK's Monetary Policy Committee said on 7 October 2026 that it reached 10.6% in September 2026.
What the numbers show
AnalysisFor every KES 100 banks had lent to customers at the end of 2025, they held KES 64 of government paper (2,499.3 / 3,881.9). A year earlier it was KES 58. Interest from the government was equal to 57% of interest from loans, up from 48%.
AnalysisInterest from loans fell partly because loans got cheaper. The CBK puts banks' average lending rate at 14.82% in December 2025, down from 16.89% a year earlier. Its benchmark series, the one our loan cost checker compares every quote with, shows 14.34% in August 2026. The government side fell less because banks kept buying.
The three biggest banks
FactsBy total assets in the CBK's 2025 tables, the three largest banks are KCB Bank Kenya (KES 1,497.7bn), Equity Bank Kenya (KES 1,040.6bn) and the Co-operative Bank of Kenya (KES 759.4bn). Their own audited statements for 2025, for the Kenyan bank alone, show:
| Kenyan bank, 2025 | Govt securities | Net loans | Interest from govt | Interest from loans | Govt share of interest income |
|---|---|---|---|---|---|
| KCB Bank Kenya | KES 332.2bn | KES 866.9bn | KES 36.4bn | KES 109.2bn | 24.2% |
| Equity Bank (Kenya) | KES 307.1bn | KES 409.4bn | KES 44.0bn | KES 58.2bn | 42.1% |
| Co-operative Bank | KES 224.5bn | KES 393.5bn | KES 26.7bn | KES 56.8bn | 30.9% |
Sources: each bank's audited statements for the year to 31 December 2025. KCB and Equity report "Kenya Government securities" and "interest on government securities" lines in the CBK format; KCB's held-for-dealing line reads "Kenya Government and other securities". Co-op's figures are its debt instruments at amortised cost, at fair value through other comprehensive income and at fair value through profit and loss, which are treasury bills and bonds except KES 0.9bn of corporate bonds; its interest line covers those debt instruments. Group figures, which include subsidiaries outside Kenya, are larger.
AnalysisEquity's Kenyan bank is the striking one. It earned KES 44.0 billion from government securities and KES 58.2 billion from loans, and it holds KES 75 of government paper for every KES 100 it has lent. KCB, the biggest, is the most loan-heavy of the three: KES 38 of government paper per KES 100 of loans.
What changed since 2024
FactsRates fell in 2025. The 91-day Treasury bill rate was 7.77% in December 2025, against 10.32% a year earlier, according to the CBK report. The 364-day bill cleared at 9.0383% at the auction for 19 October 2026. Banks' average deposit rate fell to 7.13% from 10.45%.
AnalysisGovernment bonds bought when rates were high keep paying their fixed coupons. That is one reason interest from government securities rose in 2025 even as bill rates fell.
Our verdict
OpinionKenya's banks still earn more from lending to you than to the government, but in 2025 they grew their government holdings almost three times as fast as their loans: sensible for a bank while the state pays this well, and costly for an economy that needs credit.
This is not a story about bad bankers. A bank that can earn a steady return from the state, with far less credit risk to provide for and no collateral to chase, will lend to the state. With gross bad loans at 16.0% of the sector's book at the end of 2025, the CBK's own figure, the private borrower looks expensive to serve.
The question is structural. Every shilling the Treasury borrows from a bank is a shilling that bank does not need to lend to a farmer, a shop or a family. The state sets the price of that alternative. While the government borrows this much at home, we expect banks to keep about 30% of their assets in its paper, and the rest of us compete with the Treasury for credit.
The better news is in the 2026 numbers. Private credit grew 10.6% in the year to September, up from minus 2.9% in January 2025. If that holds as rates fall, the gap can stop closing.
What would change our mind
Two or three years in which banks' loans grow faster than their government holdings. A fall in interest from government securities below a quarter of the sector's income. And a Treasury that borrows less at home, so banks have to look for borrowers who are not the state.
Information, not advice.