Sh1 Trillion Local Borrowing Plan May Squeeze Small Businesses

The government’s proposed plan to borrow approximately Sh1 trillion from the domestic market in the 2026/27 financial year is raising concerns about potential pressure on credit availability and borrowing costs for the private sector, particularly small and medium-sized enterprises (SMEs). Heavy reliance on local borrowing is expected to increase competition for funds between government and private borrowers. As the government absorbs a larger share of available liquidity through Treasury bills and bonds, banks may have less capital to lend to businesses or may raise interest rates to manage risk and returns. SMEs, which depend heavily on bank credit for working capital and expansion, are likely to feel the impact most. Higher borrowing costs could slow business growth, delay investment decisions, and affect job creation at a time when many businesses are still navigating a challenging operating environment. While domestic borrowing helps the government reduce exposure to external debt and foreign exchange risks, economists warn that sustained high local borrowing could crowd out private investment if not balanced with measures to support credit flow to productive sectors. Why This Matters Could raise lending rates and reduce access to credit for SMEs Risks crowding out private sector investment Has implications for business growth, jobs, and economic momentum Opportunity Sector SME Finance, Banking, Capital Markets, Financial Services Businesses: Need to explore alternative financing and cash-flow management strategies Banks & Lenders: Opportunity to design SME-friendly products despite tighter liquidity Policymakers: Scope to balance domestic borrowing with private sector credit support Follow @MotoSeenAfrica for more updates on business, trade, investments, opportunities and economic growth across Africa. Moto Seen Africa — Africa’s View, Seen Clearly. #KenyaEconomy #PublicDebt #SMEs #Banking #CapitalMarkets #BusinessFinance #EconomicGrowth