- Government pending bills rose to Ksh 465.87 billion by March 2026, worsening cash flow challenges for SMEs supplying public institutions.
- Delayed payments are forcing many SMEs to rely on trade finance and short term borrowing to meet payroll, pay suppliers and sustain operations.
Kenya’s rising government pending bills are pushing small and medium-sized enterprises (SMEs) deeper into a liquidity crisis, forcing many businesses to turn to structured trade finance to sustain operations, pay suppliers and retain employees as payment delays continue to strain cash flows across the sector.
Outstanding public pending bills rose to Ksh 465.87 billion as of March 2026, up 10.5 per cent from Ksh 421.6 billion recorded in the same period in 2025, according to the Controller of Budget.
The growing backlog has intensified cash flow challenges for businesses, with suppliers and contractors to ministries, state agencies and county governments waiting between 30 and 90 days, and in many cases much longer, to receive payment for goods and services delivered.
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Economists warn that the backlog is draining businesses of much-needed working capital, forcing many firms, particularly SMEs, to rely on costly short-term borrowing to meet payroll, settle suppliers and keep operations running.
“While the National Treasury recently approved a Ksh 255 billion disbursement to chip away at the arrears, small businesses still require faster, more transparent settlements to scale,” said Julius Ouma, CEO of Faulu Microfinance Bank.
With the National Treasury projecting that it will take at least two financial years to clear the backlog, financial institutions are stepping in to bridge the widening funding gap.
Among them is Old Mutual-backed Faulu Microfinance Bank, which has overhauled its trade finance solutions to help SMEs affected by delayed government payments and persistent supply-chain cash-flow challenges.
“While Kenya’s 7.4 million micro, small and medium enterprises (MSMEs) account for nearly 40 per cent of the nation’s gross domestic product (GDP), they are routinely locked out of conventional tier-one banking credit lines due to a lack of standard fixed collateral,” said Ouma.
By Bernard Magada
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