Why structured trade finance is vital for Kenya's small businesses

The private sector is facing an unprecedented liquidity crisis as mounting and systemic payment delays from ministries, state corporations and county governments choke business cash flows.

This persistent backlog of public sector pending bills is actively crippling operations, depressing private sector growth and triggering widespread job losses.

According to data from the Controller of Budget, outstanding public pending bills climbed to a record Sh465.87 billion as of March 2026, representing a 10.5 percent escalation from the Sh421.6 billion reported in March 2025.

Local suppliers and contractors routinely face payment delays of 30 to 90 days or longer, creating a persistent backlog that starves them of vital operating liquidity and forces them to secure expensive short-term debt just to maintain daily operations.

While the National Treasury recently approved a Sh255 billion disbursement to chip away at these arrears, it estimates a minimum of two fiscal years to fully clear the historical backlog. This means that SMEs still require faster, more transparent settlements to scale.

Kenya’s 7.4 million MSMEs form the backbone of the economy, accounting for nearly 40 percent of the nation’s gross domestic product.

Yet, despite their macroeconomic importance, these businesses are routinely locked out of conventional tier-one banking credit lines.

Traditional lending frameworks rely heavily on standard balance-sheet lending, which requires fixed collateral that most small enterprises lack. This structural rigidity creates a paradox where the economic engines of the country cannot access standard bank loans precisely when government payment delays threaten their survival.