Kenya’s government continues to face recovery challenges from old credit schemes, with Equity Bank and Co-operative Bank still owing a total of Sh457 million.
The amounts arise from past government programmes where public funds were passed through these banks to support farmers and specific business groups, but repayments were largely unsuccessful.
Despite the schemes collapsing years ago, the unpaid balances remain on official Treasury records.
Latest debt disclosures by the Treasury show that by June 2025, Co-operative Bank owed Sh267 million of the Sh339 million it had received, while Equity Bank had an outstanding balance of Sh190 million from Sh445 million channeled through its network.
Overall, the two banks received Sh784 million from the government over several years under targeted credit initiatives, with only Sh327 million recovered in the review period.
A senior official at one of the banks explained that the funds were part of a government effort to provide credit to smallholder farmers across sectors including cotton, dairy, pyrethrum, and irrigation.
The banks were responsible for disbursing the funds and ensuring repayment to the Treasury, but most borrowers defaulted.
The official added that the slow repayment has left balances lingering for decades, with some loans dating back to the late 1980s. These legacy loans continue to appear in fiscal reports even though they have little connection to the banks’ current lending activities.
Similar exposures have been recorded in the past among deposit-taking microfinance institutions. Faulu Microfinance Bank and Kenya Women Microfinance Bank had a combined Sh477 million owed to the State from comparable on-lending arrangements.
Treasury data shows these debts were either repaid or written off by June 2023, leaving zero outstanding balances, in contrast to the unresolved debts of Equity and Co-operative Bank.
While the amounts owed by the two major banks are small compared to total government lending, they represent part of a broader on-lending portfolio that has become a pressing fiscal issue.
The Treasury’s latest Annual Debt Management Report shows that total on-lent and direct government loans, largely to key State corporations, stood at Sh1.05 trillion by June 2025.
Over half of this exposure, about Sh547.38 billion, is concentrated in Kenya Railways Corporation, highlighting risks in the State’s credit framework.
During the year under review, repayments amounted to only Sh76.93 billion, representing just 7.32 percent of the total loan stock, underscoring persistent challenges in recovering public funds issued through these programmes.
