Kenyan banks cut loan write-offs by Sh26 billion last year, opting instead for aggressive recoveries that triggered a wave of auctions, receiverships, and liquidations.
The aggressive credit recovery strategy, detailed in the Central Bank of Kenya’s latest Financial Stability Report, shows that banks wrote off Sh7 billion in loans in 2024, down from Sh33.3 billion the previous year — a sharp fall of 79 percent that amounts to Sh26.3 billion in savings on losses.
These are facilities lenders consider irrecoverable in the wake of default and difficulties in auctioning security to recover unpaid loans or when workers who borrowed on the strength of their payslips lose jobs.
Banks' forceful pursuit of unpaid loans underlines a shift in approach in the face of rising non-performing loans (NPLs) and the push to protect profits.
The CBK, the financial regulator, requires banks to write off loans that they believe they no longer have a realistic expectation of recovering.
Instead of throwing in the towel, banks tightened credit standards and doubled down on recovery efforts, pushing several businesses into bankruptcies and liquidations.
“The banking sector focused more on loan recoveries and tightened lending standards to mitigate credit risk,” the CBK said in a report released last week.
Recoveries climbed from Sh4.7 billion in 2023 to Sh5.2 billion in 2024, helping lenders record stronger profits despite elevated defaults.
Kenya’s largest banks sharply reduced their credit-impairment charges in 2024, freeing up billions of shillings for the bottom line even as they turned to aggressive loan recoveries to keep bad debts in check.
KCB, the country’s biggest lender, cut its loan-loss provision to Sh14.7 billion, while Co-operative Bank lowered its provisioning to Sh8.7 billion. NCBA reported a Sh5 billion charge, Standard Chartered Sh2.4 billion, and Stanbic just Sh3.1 billion — with detailed disclosures showing a net release in provisions compared to 2023.
Absa and DTB also pared back to about Sh9 billion each, underlining a sector-wide easing of credit costs.
The scaling back of provisions reflects improved recoveries and a reduced need to recognise fresh losses. With fewer loans written off, banks translated the savings directly into stronger profits. Sector pre-tax earnings rose nearly 19 percent to Sh260.3 billion, said the CBK.
Wesley Manambo, a senior research associate at Standard Investment Bank, described this phenomenon as “cyclical,” noting that most banks forecast a positive macroeconomic outlook characterised by low interest rates and inflation and the possible settlement of pending bills by the government.
“So, they (banks) need to provision less. In prior years, they had to provision more,” said Mr Manambo, adding that with the cash-flow boost, even loans that had been written off have started performing.
The profitability push has gone hand in hand with a visible uptick in auctions and receiverships, as lenders enforce security rather than absorb losses. From hotels to construction firms, more borrowers are finding themselves on the auction block as banks intensify their efforts to protect earnings.
The recovery overdrive has spilled into courtrooms as banks try to pursue unpaid loans from defaulting businesses, with some loans dating back a decade.
A tough economic environment, aggravated by high interest rates and inflationary pressures, has left many borrowers without the necessary cash flow to service their loans, exposing them to foreclosure auctions.
In April, the High Court in Kiambu lifted an injunction that had shielded billionaire Peter Munga from a forced sale of his Britam Holdings shares, clearing ABC Bank to auction a Sh75 million stake tied to a Sh433 million loan dispute.
Hospitality—a sector already strained by cost-sensitive corporate travellers drifting to apartment-style stays—has not been spared, with at least four hotels placed under receivership. In July, the High Court declined to stop Stanbic Bank from exercising its statutory power of sale over Convex Commercial Logistics’ edible oil plant in Athi River after the borrower defaulted on facilities that court records put at about Sh2.07 billion.
In May, Nyoro Construction faced auctioneers over Sh860 million owed to KCB Bank.
But the auctioneers are not selling as fast as they are repossessing due to the minimum bid price, leaving a glut of seized vehicles, land, houses and office equipment as cash-strapped buyers seek to buy the properties cheaply and at outsized discounts.
The law bars banks from auctioning seized assets at below 75 percent of the prevailing market value.
Garam Investments proprietor and manager Joseph Gikonyo said that although banks have increasingly been approaching auctioneers for the disposal of distressed properties, there have been few takers.
“The only problem is getting buyers is a herculean task,” said Mr Gikonyo.
Mr Gikonyo put their success rate for disposing of these distressed properties at between 20 percent and 30 percent, very low compared to the Mwai Kibaki era when they enjoyed a success rate of over 50 percent.
Behind the wave of enforcement sits an elevated stock of bad loans, with the CBK showing gross NPLs rose to Sh728.5 billion by mid-year, from Sh672.6 billion in December 2024.
The regulator noted that the pressure was concentrated in trade, real estate, personal/household, tourism and building and construction. The NPL ratio climbed to 17.6 percent in April 2025, up from 17.2 percent in February, before policy rate cuts began to filter through to funding costs.
The CBK also noted that banks did not put as much cash aside to shield themselves against losses on these bad loans, with most going hard on defaulters instead.
After the 2023 spike in impairment charges that saw lenders brace for defaults, the sector moderated loan-loss provisions in 2024, relying more on recoveries and restructurings than fresh write-offs — a pattern the CBK says fed directly into stronger 2024 profitability.
Banks will be hoping for a different dynamic in 2025, riding on a combination of lower policy rates and unrelenting recoveries, which have supported earnings among major lenders through the first half even as the bad-loan ratio stayed high.
