How NCBA Bank Is Betting On SMEs as the True Engine of Kenya’s Economy

While many banks have chosen the well-trodden path of lending to the government, chasing risk-free returns in Treasury bills and bonds, NCBA has taken a different route. It has made a deliberate, strategic, and courageous decision to channel its resources towards small and medium-sized enterprises (SMEs)—the heartbeat of Kenya’s economy.

NCBA has set aside a dedicated fund specifically to finance SMEs and entrepreneurship. No other bank in the country has made such a bold declaration. This is not just banking; it is nation-building. For a sector that contributes nearly 40% of Kenya’s GDP and employs more than 80% of the workforce, yet is starved of affordable credit, NCBA’s move is a breath of fresh air.

Kenya’s SME ecosystem has long been trapped in a vicious cycle. Punitive policies, complex tax codes, and limited access to affordable credit have turned what should be the country’s most vibrant sector into one riddled with struggle. The government’s economic surveys show that three out of five SMEs fail within the first five years of operation, and lack of financing is consistently cited as the number one killer.

Banks have historically been reluctant to touch SMEs. The risks are perceived to be too high, the credit profiles too weak, and the paperwork too messy. Instead, the banking sector has sunk deeper into the comfort zone of lending to the government, where returns are guaranteed, and risk is close to zero. It is a safe game, but it leaves the private sector, and particularly SMEs, choking.

This is why NCBA’s commitment matters to the SME ecosystem. It signals not only belief in Kenyan entrepreneurs but also an understanding that real growth cannot come from the public sector alone. True economic expansion stems from thriving enterprises that create jobs, pay taxes, and build industries from the ground up.

Consider the irony: SMEs contribute 92% of new jobs in the country, according to the Kenya National Bureau of Statistics (KNBS), yet they receive less than 15% of total bank credit. The disproportionate allocation of capital has crippled their potential, making them dependent on shylocks, digital loan apps, and exploitative lenders charging double-digit interest rates that suffocate rather than support growth.

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NCBA is effectively stepping into a vacuum. By choosing to re-align its balance sheet in favour of entrepreneurs, it is solving not just a financing gap but also correcting a structural imbalance in Kenya’s economy. The bank is not simply disbursing loans; it is unlocking opportunity.

The SME sector has been battered by layers of punitive taxation. From turnover tax that ignores whether businesses are profitable or not, to VAT structures that tie up cash flow, to county levies that suffocate traders, the environment has often been hostile. NCBA’s funding program offers relief in an environment where government policies have been more extractive than supportive.

In addition, SMEs are plagued by bureaucracy. Opening a business, accessing compliance certificates, or simply getting licences often takes weeks if not months. For a bank to walk alongside such businesses with tailored financing and advisory support is to inject hope into a sector long abandoned.

NCBA has also understood something other lenders have missed: the resilience of entrepreneurs. Despite the hurdles, Kenya’s SME sector is innovative, adaptive, and restless. From informal kiosks in Mathare to fintech start-ups in Nairobi’s Kilimani, from small agro-processors in Eldoret to boda-boda operators in Kisumu, entrepreneurs are the true hustlers who refuse to give up.

By availing KSh 100 billion, NCBA is acknowledging this resilience and saying: “We see you, we believe in you, and we are willing to take the journey with you.” This is a radical shift in financial thinking.

And the impact will not just be individual. The multiplier effect of SME financing is immense. A single supported agro-processor creates direct employment for factory workers, indirect jobs for transporters, and stable incomes for farmers supplying raw materials. A well-funded retail shop turns into a mini-distributor, supplying smaller traders. Capital flows through supply chains, multiplying its impact.

Studies by the World Bank and IFC show that every dollar invested in SMEs generates up to three dollars in economic activity. This is why NCBA’s decision could end up being one of the most transformative interventions in Kenya’s banking history.

Moreover, supporting SMEs builds resilience in the wider economy. Reliance on government borrowing creates systemic risks. If the government defaults or struggles to repay, banks are exposed. But by spreading risk across thousands of SMEs, banks diversify and strengthen the financial system. NCBA has grasped this macroeconomic truth earlier than most.