How Kenya can unlock Sh209b in pension savings to grow businesses

Kenya’s pension sector and the potential to unlock billions for investment and growth. [Courtesy]

Kenya’s pension industry is sitting on a financial powerhouse that could transform the economy, but a substantial portion of it remains largely untapped for productive investment.

Today, pension assets in Kenya have grown to hit Sh2.81 trillion, equivalent to 16.05 per cent of the country’s gross domestic product (GDP), according to the latest industry data from the Retirement Benefits Authority (RBA).

In 2025 alone, the industry added Sh554 billion in assets, reflecting annual growth of 25 per cent.

This growth has been driven by the savings of millions of Kenyan workers and the continued implementation of the NSSF Act, which has steadily increased contributions into retirement schemes.

But beneath this growth story lies a major structural imbalance. More than half of all pension assets, about Sh1.47 trillion or 52 per cent of the industry portfolio, is invested in government securities. Another 18.6 per cent sits in guaranteed funds. But private equity accounts for only 1.1 per cent of pension assets despite regulations allowing schemes to allocate up to 10 per cent to the asset class.

This means Kenya is leaving a massive investment opportunity on the table. Within the current regulatory framework alone, pension schemes could unlock an estimated Sh209 billion in additional investments into private equity and venture capital without changing any laws.

At a time when businesses are struggling with expensive credit, startups are fighting for survival and youth unemployment remains one of Kenya’s biggest economic threats, this untapped pool of long-term capital could become one of the country’s most powerful engines for economic transformation.

Globally, pension funds are increasingly being used as long-term growth capital to finance businesses, infrastructure and innovation.

According to the International Monetary Fund, global pension savings reached $63.1 trillion (Sh8,190 trillion) by the end of 2023, nearly three times higher than two decades ago. Countries that have successfully mobilised pension capital have demonstrated what is possible.

In Australia, pension assets are now larger than the country’s GDP and play a major role in financing infrastructure and private enterprise, according to Pension Markets in Focus 2024-2025 by the Organisation for Economic Co-operation and Development. In the United States, pension funds are among the largest institutional investors in venture capital and private equity, helping businesses scale into global companies.

Namibia introduced mandatory allocations to unlisted investments in 2014 and has since built a growing domestic private equity ecosystem. Ghana has also expanded pension investment into alternative assets to support local economic growth. The RBA data shows private equity investments grew by 49.2 per cent in the second half of 2025 to reach nearly Sh30 billion. Pension schemes are already investing in strategic sectors through vehicles such as the Africa50 Infrastructure Fund, among others.

At the same time, listed corporate bonds surged from Sh3.8 billion to Sh28.3 billion, driven largely by infrastructure-backed investments such as the LINZI Infrastructure Asset-Backed Security that is financing the Talanta Sports Stadium.

They show pension schemes are already beginning to shift towards more productive long-term investments that support economic development while still generating returns for members.

Most alternative investment assets still have room for growth under the current statutory limits, and this is where the real opportunity lies.

 Kenya’s pension industry remains heavily concentrated in four traditional asset classes that account for more than 90 per cent of all pension assets. While government securities provide stability, excessive concentration limits the broader economic role pension capital can play. Long-term pension money is naturally suited for sectors that require patient capital, such as manufacturing, affordable housing, agriculture, healthcare, logistics, technology and clean energy.

Financial vulnerability

Unlike commercial banks, which mainly provide short-term credit, pension funds have the advantage of investing over decades.

This makes them ideal partners for businesses and projects that need time to scale sustainably.

The Central Bank of Kenya’s MSME Access to Credit Survey 2024 shows strong demand for financing across trade, manufacturing, agriculture, transport and real estate.

Yet many businesses continue to rely on short-term, expensive loans that limit expansion and increase financial vulnerability.

If even a fraction of the untapped Sh209 billion allocation were directed towards productive sectors, the economic impact would be significant.

Manufacturers, agribusinesses, clean energy companies, and technology startups could expand operations, create jobs, strengthen food supply chains, scale local energy solutions, and access growth capital locally instead of relying entirely on foreign investors. A boda boda rider could access cheaper asset financing.

A young entrepreneur with a viable business idea could raise local capital. Farmers could benefit from stronger agricultural value chains and better market access. More businesses would grow, creating jobs and expanding the tax base.

Kenya’s pension industry is already financially stable enough to support prudent diversification. The RBA report shows that pension schemes currently maintain a liquidity ratio of 71 per cent, indicating a strong capacity to meet short and medium-term financial obligations.

Pension money should not simply sit on the sidelines, financing government consumption while businesses struggle for capital.

It should help finance industries, infrastructure, innovation and enterprises that create jobs and build long-term prosperity.

The writer is the CEO of Octagon Africa (Kenya)