Kenyan businesses are facing significant headwinds, including rising operational costs, unpredictable taxation, and limited access to affordable credit, which CEOs warn could impede economic recovery in 2025.
A Central Bank of Kenya (CBK) survey conducted between January 13-24, 2025, of over 1,000 CEOs revealed that while there is optimism about future economic prospects, these persistent challenges are creating substantial uncertainty.
The CBK survey indicated that 63% of the surveyed CEOs represent privately owned domestic firms, with 52% overseeing companies with a turnover exceeding $11.5 million (KES 1 billion).
Despite expectations of higher growth in the next 12 months driven by favourable weather and macroeconomic stability, the cost of doing business remains a primary concern.
“However, liquidity challenges (including from pending bills and limited access to credit facilities), subdued consumer demand, and cost of doing business are key factors that could constrain growth at company level,” part of the survey findings show.
A key point of contention is the unpredictability of taxation. CEOs report frequent and abrupt tax changes that hinder long-term planning and investment.
Over the past two years, the government has implemented various revenue-boosting measures, including increased VAT on essential goods, higher import duties, and new levies on mobile money transactions.
While intended to reduce public debt, these policies have been criticized by the private sector for weakening growth and eroding consumer spending power.
“The domestic macroeconomic environment is challenging. In as much as the country seems to have resolved to a considerable degree, the exceptional shocks from inflation, currency fluctuation, and immediate fiscal risks in 2024 and 2025 appear fluid,” according to the NCBA Monthly Economic Report for February 2025.
Access to affordable credit remains another significant challenge. Despite three CBK interest rate cuts, many businesses, particularly SMEs, find borrowing difficult due to cautious lending practices by banks.
NCBA noted, “For the credit cycle, demand for credit remains low following a weak macroeconomic backdrop and elevated borrowing cost. Moreover, the full transmission of the downward revision of interest rates takes long—about 6–9 months; hence, lending rates could stay relatively elevated in Q1. Resultantly, the private sector credit growth rate is likely stay below 5% in Q1, implying that gross non-performing loans print 16-17% in most of Q1.”
While major banks like KCB Group, Equity Group, Co-operative Bank, I&M, and DTB have lowered interest rates by one to four percentage points, many businesses feel these reductions are insufficient.
Despite these challenges, CEOs expect increased production in Q1 2025 compared to Q4 2024, focusing on cost-cutting and diversification to sustain growth.
However, Stanbic Bank PMI reports indicate that optimism levels across the private sector remain weak, with only 6% of surveyed companies projecting output expansion.
Nasim Devji, DTB Group CEO and Mr. Murali Natarajan, Managing Director & CEO
DTB Kenya during the DTB 5th Economic and Sustainability Forum held at Serena Hotel in Nairobi.
Diamond Trust Bank (DTB) forecasts increased lending to individuals and SMEs as the economy stabilizes. DTB Kenya CEO Murali Natarajan expressed confidence in doubling the bank’s balance sheet within three to four years through digital offerings and expanded branch networks.
Dr. Chris Kiptoo, Principal Secretary for the National Treasury, highlighted government efforts to stabilize the economy and boost lending through initiatives like the Credit Guarantee Scheme. He also detailed the government’s focus on agriculture, exports, and infrastructure development.
While Kenyan businesses demonstrate resilience, CEOs warn that without predictable tax policies and improved access to credit, growth will be driven by survival strategies rather than genuine expansion. They emphasize the need for clear, supportive policies to ensure sustainable economic recovery.
