NAIROBI, Kenya, July 27 – Small and medium-sized enterprises (SMEs) trapped in a severe liquidity crunch are turning to structured trade finance to survive, as unpaid government pending bills climb past record highs.
According to data from the Controller of Budget, outstanding public pending bills stood at Sh465.87 billion as of March 2026. This was a 10.5 percent increment from Sh421.6 billion recorded in March 2025.
The systemic payment delays from ministries, state agencies, and county governments have left local suppliers and contractors waiting between 30 to 90 days—and in many cases, significantly longer—for compensation.
Economists warn that the persistent backlog is starving private enterprises of vital operating liquidity, forcing vulnerable businesses to take on expensive short-term debt simply to maintain daily operations.
“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 Julius Ouma, CEO of Faulu Microfinance Bank.
With the National Treasury estimating that it will take at least two fiscal years to fully clear the historical pending bills backlog, alternative financiers are moving fast to plug the cash deficit.
A prime example is the Old Mutual-backed Faulu Microfinance Bank, which recently overhauled its trade finance portfolio to support small businesses heavily impacted by public tender delays and supply chain cash-flow constraints.
“While Kenya’s 7.4 million MSMEs account for nearly 40 percent 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.
Faulu’s mitigated credit strategy relies heavily on partnering with reputable underwriters to share risk, shifting away from standard balance-sheet lending.
The bank structures credit directly around the trade cycle under its flagship Biashara SME line, offering customized financial instruments tailored to specific transaction phases.
These include LPO and invoice financing, where businesses holding a local purchase order or an unpaid invoice are allowed to access cash advances instead of waiting out the client’s long payment cycle.
The lender also supplies fast-tracked bid bonds, performance bonds, and advance payment guarantees against partial security, ensuring SMEs can bid on multiple tenders simultaneously without locking up their operating capital.
