The delayed settlements have become one of the biggest threats facing Kenya's micro, small and medium-sized enterprises Faulu microfinance bank CEO Julius Ouma during a stakeholder engagement forum in Nairobi The latest Controller of Budget (CoB) implementation review shows that outstanding pending bills owed by the national and county governments rose to Sh465.87 billion as of March 2026, up 10.5 per cent from Sh421.6 billion recorded in the same period last year.
The growing backlog has intensified liquidity pressures on businesses that depend heavily on government contracts, with many suppliers waiting more than a year to receive payment. The delayed settlements have become one of the biggest threats facing Kenya's micro, small and medium-sized enterprises (MSMEs), which form the backbone of the country's economy.
According to the 2025 MSME Survey by the Kenya National Bureau of Statistics (KNBS), Kenya has about 7.4 million MSMEs, contributing nearly 40 per cent of the country's Gross Domestic Product (GDP) and employing more than 15 million people, making the sector the country's largest source of jobs outside agriculture.
However, economists say the growing stock of unpaid government bills is denying these businesses the working capital needed to expand, forcing many to rely on costly short-term borrowing or suspend operations altogether. "The delayed payment of pending bills has become a significant drag on private sector growth because businesses cannot plan, invest or even pay their suppliers on time," economists have repeatedly warned, noting that liquidity shortages ripple across entire supply chains.
The National Treasury recently announced plans to release Sh255 billion to reduce the pending bills backlog. Even so, Treasury officials estimate it could take at least two financial years to fully clear the historical arrears, leaving businesses searching for immediate financing solutions.
"While the National Treasury recently approved a Sh255 billion disbursement to chip away at the arrears, small businesses still require faster, more transparent settlements to scale," said Faulu Microfinance Bank chief executive officer Julius Ouma. Financial institutions are now redesigning lending products around the realities facing SMEs.