The US$180M project had been suspended since 2001 following criticisms from environmental groups and apparent differences between the two countries over further funding.
With the new loan, reported by Kyodo News International, work will now be allowed to continue on the scheme, located in Nyanza province about 60km south of Kisumu alongside Lake Victoria.
According to power utility KenGen, the plant will produce around 330GWh of electricity a year.
