For Kenya’s financing future, bank boardrooms must change, urgently

 Let’s be honest: this is not development banking. It is collateralised risk avoidance, packaged as credit expertise. And the result is visible. While the book value of collateral is rising, so too are non-performing loans — proof that asset obsession isn’t translating into smarter lending.

 If Kenya is to unlock real economic growth, banks must stop financing what looks safe and start understanding what creates value.

 The deeper problem lies at the top. Kenya’s banks are not suffering from weak regulations. They are shackled by a legacy mindset among bank leadership and ownership.

Decades of thriving on fee-based products, government securities, and land valuation have left many institutions ill-equipped to assess a scalable agritech platform in Eldoret or a viable clean energy venture in Turkana. These banks can value a plot of land in seconds yet fail to construct a business case for a logistics company or an agro-processing hub.

The result? Capital flows not to where it will generate the most economic value, but to where it gives the illusion of safety. It’s not lending. It’s white-collar loan sharking and it has been institutionalised.

And when collateral-backed projects fail (as many do), the blame is quickly placed on “macroeconomic headwinds”, never on the superficial due diligence or the lack of internal credit competence. The credit models themselves are rarely put under scrutiny.

It’s time for bank CEOs to shift focus from optics to substance, by prioritising the development of internal teams that truly understand economic value, sector fundamentals and project viability.

The failure of imagination extends into bank boardrooms. Too many directors are appointed based on patronage, outdated credentials or political considerations, not competence or foresight. This leaves us with well-meaning individuals who resist change and add limited strategic value.

Critically, few boards have members who understand global capital markets or the structural shifts shaping sectors like energy, logistics and technology. Without the courage to question entrenched models, these boards cannot deliver transformation. Kenya cannot build world-class financial institutions with yesterday’s governance mindsets.

Collateral addiction

Board composition must be rethought, urgently. Banks need directors with global financial expertise, sector-specific insight, and a track record of scaling ideas, not just sitting on committees. Until this shift happens, banks will remain well-governed on paper but stagnant in practice.

The cost of collateral addiction is often underestimated, but it is profound and corrosive.

This system leaves out thousands of viable, cashflow-generating businesses locked out of growth, not because they are risky, but because they lack title deeds.

Meanwhile, poorly structured projects with weak fundamentals but “acceptable collateral” walk away with millions, only to end up as non-performing loans a few quarters later.

While the book value of collateral continues to rise, non-performing loans are also increasing at a disturbing rate, a clear signal that this collateral addiction is not translating into smarter lending decisions.

We cannot claim to champion transformation while using 1970s credit models in a 21st century economy. The result is a national misallocation of capital, where the cost isn’t just borne by the banks, but by the country at large in the form of lost jobs, muted innovation and underwhelming industrialisation. This isn’t just inefficient. It’s a betrayal of Kenya’s economic potential.

Policymakers have made credible efforts, especially through the Central Bank of Kenya and the National Treasury, in pushing for financial inclusion for SME support and innovation. The bottleneck, however, is not regulatory, it is institutional inertia within the private banking sector.

What is needed now is a decisive shift, an aggressive investment in project finance skills, with short-term talent importation and global secondments, especially from institutions experienced in flow-based lending and structured finance and governance reforms that reward project intelligence over asset-based comfort. This needs to be supported by blended finance tools and credit guarantees to underwrite viability-based lending, not just asset-backed deals.

These are not policy burdens. They are necessary investments in a resilient, future-oriented financial ecosystem.

At a societal level, Kenya must also reset the narrative around financial default. Strategic wilful defaulters are often lionised as clever operators. This is corrosive. In countries like Germany, Japan or South Korea, default carries social stigma.

Kenya must foster a culture that celebrates integrity and punishes evasion. Regulators and bank leadership must enforce collective mechanisms to track, penalise, and publicly flag wilful defaulters. This is not about punishment—it is about restoring faith in the credit system.

Kenya doesn’t lack entrepreneurs. It suffers from a lack of bankers and board leaders willing to back entrepreneurs who don’t come bearing land titles.

To truly transform, Kenyan banks must move from being risk-averse lenders to informed risk managers, from collateral hoarders to capital enablers, from institutional incumbents to innovation allies. They must stop financing what feels safe and start financing what builds the future.

This transformation requires courage—from CEOs, board chairs and shareholders. Overhauling board structures is no longer optional, especially as Kenyan banks begin to expand their regional footprint and if they want to compete with the new entrants which are coming in with an evolved mindset.

Banks should still secure risk appropriately, but must prioritise project fundamentals, viability, and sector value creation over just land-based collateral. The real risk mitigant must be the rigorous understanding of economic value, not a title deed.

Because if we continue financing real estate instead of real ideas, and if we keep celebrating those who default instead of those who deliver, we won’t just miss the next wave of growth. We’ll be the reason it never arrived.

 The writer is the Geo-Economist & Head of Advisory at Andersen.