How NCBA Is Addressing The SME Credit Gap in Kenya

In Kenya, small and medium-sized enterprises (SMEs) are the backbone of Kenya’s economy, contributing significantly to employment, innovation, and GDP growth.

According  to the Kenya National Bureau of Statistics (KNBS), SMEs account for approximately 98 percent of all businesses in Kenya and contribute over 30 percent of total employment (PDF). The World Bank further estimates that SMEs contribute about 40 percent of Kenya’s GDP, highlighting their central role in economic activity.

Despite their significance, access to formal credit remains limited. Research by FSD Kenya and the Central Bank of Kenya indicates that less than 10 percent of SMEs in Kenya have access to formal bank credit (PDF), with many relying instead on informal sources such as savings groups, supplier credit, or on the mushrooming mobile lending apps. Some SMEs report that they are either fully financially excluded or only partially served by formal financial institutions, largely due to lack of collateral, limited credit history, and informality of their operations.

The FinAccess Household Survey also consistently shows that while financial inclusion has improved in Kenya overall, a substantial financing gap persists among small businesses, particularly in rural areas and among youth and women led enterprises.

In the end, these credit constraints limit SMEs’ ability to scale, compete effectively, and fully realize their economic potential, despite being one of the most dynamic segments of the Kenyan economy.

For Kenyan SMEs, the path to growth depends on access not only to capital, but also to tools that enable resilience and scalability. Through its integrated suite of digital platforms, credit solutions, and trade financing tools, NCBA is helping redefine what access to finance truly means in today’s economy.

NCBA Bank sees an opportunity to serve and eliminate this structural mismatch between traditional lending models and the realities of how SMEs operate.

Many SMEs in Kenya function within semi-formal or informal frameworks. While these businesses may generate consistent cashflows, they often lack audited financial statements, formal bookkeeping systems, or documented credit histories. For traditional lenders, SMEs are high-risk especially because they don’t have structured financial data, have no reliable records and therefore locked out of access to credit.

Many SMEs also have no collateral which further compounds the issue. Conventional lenders are typically asset-backed, requiring land, buildings, or other fixed assets as security. However, NCBA’s Elevate platform has opened up to creative and youth-led enterprises, women-owned businesses, and startups unable to secure the funding they need for their music or art.

Beyond structural barriers, there is also a trust and awareness gap. Some SME owners remain hesitant to engage with financial institutions due to past experiences, perceived complexity in loan processes, or limited understanding of available financial products. In other cases, financial institutions have historically struggled to design products that align with the dynamic and often unpredictable nature of SME cashflows. The result is a disconnect that slows down financial inclusion.

However, according to NCBA Bank, the landscape is evolving and the Group aims to play a central role in reshaping SME financing in Kenya.

Recognising that traditional credit models cannot fully serve modern SMEs, NCBA has invested heavily in data-driven and digital-first lending solutions. By leveraging alternative data sources such as transaction history, mobile money flows, and account behaviour, NCBA is able to assess creditworthiness more accurately and extend financing to previously underserved segments.

A key pillar of this transformation is NCBA’s M-Shwari platform, which enables users to access instant savings and micro-loans directly via mobile phones. Built in partnership with Safaricom, M-Shwari uses mobile transaction data to provide unsecured credit, making it one of the most widely used entry points to formal financial services for micro and small enterprises.

Closely linked is Fuliza, the mobile overdraft facility integrated with M-Pesa. For SMEs, Fuliza acts as a real-time liquidity buffer, allowing transactions to go through even when account balances are insufficient. This has become particularly important for traders and service providers who operate on tight daily cash cycles.

For more structured digital banking, NCBA Loop provides SMEs with a full-service digital banking ecosystem. Loop combines business accounts, savings tools, and flexible lending products, including personal and business loans tailored to cashflow patterns. It also helps entrepreneurs track spending and manage finances more efficiently through digital dashboards.

That’s not all. NCBA’s SME Banking division offers traditional yet highly tailored financing products such working capital loans, designed to support day-to-day operations such as payroll, inventory purchase, and supplier payments. SMEs can also access asset finance, enabling them to acquire vehicles, machinery, and equipment critical for expansion without large upfront capital outlays.

For businesses involved in trade and import/export, NCBA provides trade finance solutions, including letters of credit, bank guarantees, and import financing. These instruments reduce counterparty risk and allow SMEs to engage confidently in both local and international trade.

Another important offering is invoice discounting and receivables financing, which allows businesses to unlock cash tied up in unpaid invoices. This is especially useful for SMEs supplying larger corporates or government institutions, where payment delays are common but operational expenses continue to accumulate.

NCBA also supports SMEs through overdraft facilities linked to business accounts, giving firms short-term flexibility to manage cashflow gaps without disrupting operations. In addition, business credit cards and merchant solutions (including POS and card acquiring services) enable SMEs to accept payments seamlessly and manage business expenses more effectively.

For asset-heavy businesses, NCBA’s logbook and equipment financing solutions provide access to vehicles and machinery, helping entrepreneurs expand operational capacity while spreading repayment over time.

Complementing these financial products are digital banking platforms such as NCBA Internet Banking and the NCBA mobile banking app, which give SMEs real-time control over their accounts, payments, and loan facilities. These tools are increasingly important as businesses move toward digital-first operations. Digitization has also played a major role in financial inclusion with the Group reporting that over 90% of its transactions were conducted through digital channels.

Importantly, NCBA recognises that financing alone is not enough. The bank continues to invest in financial literacy, business advisory support, and SME capacity-building initiatives that help entrepreneurs formalise operations, strengthen governance, and improve long-term sustainability.

Ultimately, closing the SME credit gap requires more than just increasing access to loans. It demands a fundamental shift in how financial institutions understand and serve businesses. It requires ecosystems built on data, flexibility, and trust.