Economy posts robust growth but leaves Kenyans worse off
Business
By
Graham Kajilwa
| Aug 10, 2026
A trader selling cucumbers at Wakulima market in Nairobi on July 15, 2026. [Kanyiri Wahito, Standard]
Limited access to long-term financing, external economic pressures, and slow job creation are major obstacles preventing average Kenyans from benefiting from the country’s economic growth.
Despite Kenya’s gross domestic product (GDP) expanding by an average of five per cent annually, a report from the African Development Bank (AfDB) notes that Kenya’s economic growth is not inclusive.
It cites slowed GDP per capita, which it estimates will soften at 2.6 per cent in 2026, as the signal of how uneven Kenya’s economy is growing. The targeted African average GDP per capita growth for poverty eradication is 3.5 per cent.
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“The limited inclusiveness of Kenya’s recent growth performance is also reflected in trends in real GDP per capita,” reads the Country Focus Report 2026 titled “Mobilising Kenya’s Development Financing at Scale in a fragmented World”.
The report documents that Kenya’s real GDP per capita growth improved from 2.7 per cent in 2024 to three per cent in 2025, exceeding the African average of 2.1 per cent.
“However, it remained below the 3.5 per cent benchmark identified in the 2026 African Economic Outlook as broadly consistent with transformative poverty reduction,” it adds.
GDP per capita is a measure of a country’s total economic output per person. It is the closest indicator to the quality of life, as higher growth means the quality of living has improved.
The report says per capita growth is projected to moderate to 2.6 per cent in 2026 before recovering to 2.9 per cent in 2027, reflecting higher living costs and external headwinds.
“In addition, Kenya continues to lag the wider East African region, where per capita growth is estimated at 4.1 per cent in 2025 and projected to remain above three per cent through 2027,” the report says.
The AfDB report speaks of Kenya’s economic performance in 2025, stating how it remained resilient, despite a challenging domestic and external environment, but still insufficiently inclusive.
“Growth strengthened modestly, reaching five per cent in 2025, from 4.7 per cent in 2024, driven by services,” the report says. “However, labour market outcomes remain challenging, with unemployment estimated at 13.9 per cent, suggesting that the benefits of growth have yet to translate into sufficiently broad-based improvements in employment, incomes, and living standards.”
The report opines that the lack of a pipeline of bankable projects, that would spur capital markets and the country’s financial system, which still does not favour small businesses, are some of the country level macro-issues that limit inclusive growth.
AfDB insists on strengthening monetary policy particularly through the regulator’s continued implementation of the Kenya Shilling Overnight Interbank Average Rate (KESONIA)-linked credit pricing framework.
Further, reductions in non-performing loans and measures to address regulatory and institutional impediments to credit intermediation, alongside improved credit information and collateral systems and deepening domestic capital markets, should be part of this strategy.
“These measures would help expand access to finance for micro, small and medium enterprises (MSMEs) and productive sectors, thereby supporting investment and job-creation,” the bank said.
But AfDB noted that Kenya’s development financing challenge is increasingly one of mobilising and allocating capital more effectively, rather than expanding access to finance alone. It notes that despite relatively high levels of financial inclusion, growing institutional savings and a diversified financial system, significant financing gaps persist, estimated at 11.6 per cent of GDP by 2030.
This is because available resources are not being efficiently channelled into productive investment.
“Mobilising additional investment will require a stronger pipeline of investment-ready projects and deeper domestic capital markets,” the bank says in the report.