Revealed: Hustlers struggle despite lower loan interest rates

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When he appeared before the Senate on Wednesday, National Treasury John Mbadi told Senators that the reduction of the Central Bank of Kenya (CBK) benchmark rate from 13 percent to 11.25 percent had increased access to credit for small and medium-sized enterprises (SMEs) and households, boosting incomes and economic growth.

But as Kenyans say, kwa ground mambo ni different--things on the ground are different.

At Gikomba Market, a hub for vegetables, foodstuff, fish and second-hand clothes, traders are feeling the pinch despite easier loan terms.

Mary Wanjiku, a vegetable seller, says she borrowed Sh50,000 last month to restock her stall. After repaying interest, transport and storage costs, she estimates her net gain was barely Sh5,000.

“The loan helped me buy more, yes, but profits are tight. Rent and transport eat a lot,” she said.

Similarly, in Eastleigh’s Garissa Lodge area, electronics and clothing sellers report that lower interest rates have not translated to higher sales.

Ali Hussein, who runs a household goods shop, says demand has stagnated while operational costs continue to rise.

“CBK says loans are more accessible, but the real problem is customers don’t have cash to spend. I borrow, I sell, I repay, and I barely make anything extra,” he said.

Data from CBK shows that as of December 2024, credit to the private sector stood at KSh 7.14 trillion, up 1.4% from the previous year.

Commercial banks accounted for 96.8% of this lending, with microfinance banks and digital credit providers contributing 0.8% and 2.4% respectively.

But traders at street level say the growth is mostly in large-scale corporate loans, leaving hustlers with high-interest informal loans or small digital credit at rates that still strain daily earnings.

Traders’ experiences suggest that while more money circulates in the economy on paper, the benefit to ordinary Kenyans remains limited.

A small-scale mitumba seller in Gikomba who asked not to be named explained: “I took a Sh20,000 loan through M-Pesa. After paying service charges and delivery fees, only about Sh16,000 is left to buy stock. If the stock doesn’t sell fast, I am in trouble.”

Economists say this disconnect is common in fast-growing credit markets. While benchmark rates affect the cost of borrowing, real gains for small traders depend on demand, inflation, operational costs, and access to larger markets.

CS Mbadi, however, maintains that interest rate reductions have eased borrowing for SMEs and households.

“Lower rates improve access to credit and stimulate economic activity,” he told the Senate.

But traders argue that easy loans alone cannot compensate for rising living costs, fluctuating demand, and competitive pressures in densely packed markets.

They call for complementary measures, such as business development support, better infrastructure, and targeted subsidies, to ensure that credit growth translates into real income gains.

The gap between official credit statistics and the daily realities of hustlers highlights a critical question: how can policy interventions genuinely reach the people who need them most?