Businesses are facing a tougher battle for credit as banks increase their investments in government securities, raising fresh concern that heavy public borrowing could leave the private sector with less money to finance expansion, create jobs and support economic activity.
The concern emerged during a forum bringing together Parliament and private sector representatives to examine how Kenya’s growing public debt is affecting businesses, investment and access to financing.
The National Assembly’s Committee on Public Debt and Privatisation, chaired by MP Abdi Shurie (Mbalambala), held its first Multisectoral Forum on Public Debt Management on Thursday, August 20, 2026.
The meeting, organised in partnership with the National Democratic Institute (NDI), provided an opportunity for private sector groups to share their concerns with Parliament and discuss possible ways of dealing with the impact of public borrowing on the economy.
Shurie said the views of businesses and other stakeholders would be useful in helping Parliament deal with the country’s debt challenges and guide fiscal policy.
“Your input will be highly appreciated and I’m sure it will go a long way in addressing the challenges we face in dealing with matters of public debt,” Hon. Shurie stated.
One of the main concerns raised was the growing preference by banks to invest in government securities instead of lending to businesses.
The Kenya Bankers Association (KBA), which led a session on domestic borrowing, credit and financial sector stability, said the increase in government borrowing was changing how banks allocate their funds.
Arnold, Finance Manager at the Kenya Bankers Association, explained the banking sector’s position: “As government appetite for local borrowing goes up, then banks being businesses… you put your money there. We’ve seen a crowding out effect where banks then put most of their investments to government through purchase of government papers as compared to onward lending to the normal customer.”
According to figures presented by KBA, banks increased their investments in government securities by 58 per cent between June 2024 and May 2026.
Private sector lending, however, grew by just 11 per cent during the same period.
The figures have raised concern among stakeholders because a large share of bank assets is now linked to the government. Nearly 30 per cent of the banking sector’s total assets are tied to the government, exposing banks to a single borrower while businesses struggle to secure financing.
The Kenya Association of Manufacturers (KAM) warned that restricted access to credit is coming at a difficult time for the manufacturing sector.
KAM said the contribution of manufacturing to GDP has dropped from 11.8 per cent in 2011 to 7.1 per cent today.
The sector continues to face high production expenses, expensive energy and difficulties accessing credit, factors that stakeholders said are affecting its ability to expand and remain competitive.
The Kenya Private Sector Alliance (KEPSA) also took part in the discussions on debt sustainability, economic productivity and private sector development.
KEPSA representatives called for increased use of Public-Private Partnerships as one way of supporting development while easing pressure on government resources.
They also urged the government to keep the tax system stable, arguing that predictable tax policies are important in attracting investors and supporting long-term business decisions.
Beyond the impact of borrowing on businesses, participants raised questions about how information on public debt is managed and made available to the public.
Stakeholders called for the Public Debt Management Office to be automated so that citizens, businesses and investors can easily access current information on the country’s debt.
Hon. Zachary Kwenya (Kinangop) said Kenyans should not have to depend on committees to establish the size of the country’s debt when such information could be made available online.
“It is really concerning when as a country we have to form a committee to track our debt, you just need to have a website where you click on it [and] you see the public debt,” Hon. Zachary Kwenya (Kinangop) noted.
Participants said greater transparency would make it easier for the public and investors to follow changes in the country’s debt position.
They further warned that continued heavy reliance on domestic borrowing could reduce the funds available to companies, affecting their ability to invest, expand operations and create employment.
Stakeholders therefore called for a change in the way government borrowing is managed, alongside stronger measures to support industries and encourage private investment.
The forum brought together representatives from Parliament, KBA, KAM, KEPSA and other private sector stakeholders as they sought practical solutions to the challenges created by public debt.
The discussions are expected to strengthen cooperation between Parliament and businesses while helping develop measures aimed at improving debt management, supporting investment and protecting private sector growth.