The Central Bank of Kenya (CBK) has announced that it will lift the moratorium on the licensing of new commercial banks after almost ten years. This decision, set to take effect from July 1, 2025, marks a major shift in Kenya’s banking industry, which has been on hold since November 17, 2015. The moratorium was initially put in place due to concerns over governance, risk management, and operational challenges within the banking sector. Since then, the CBK has been working to improve the legal and regulatory framework that governs the industry, ensuring a more stable and efficient environment for financial institutions.
A key part of this change is the increase in the minimum core capital requirement for banks. By December 2024, the new minimum capital requirement was raised to KSh 10 billion, or about $77 million. This is a significant jump from the previous KSh 1 billion. The goal of this adjustment is to ensure that only well-capitalized and stable banks can enter the market, strengthening the banking system and making it more resilient to shocks. The increase in capital requirement is expected to promote long-term stability and build trust in the sector.
The CBK’s decision is expected to have a positive effect on Kenya’s banking sector. With the lifting of the moratorium, new commercial banks will be allowed to enter the market, bringing with them more competition and innovation. This will likely lead to improved services for customers, as well as greater financial inclusion. It will also present investment opportunities for both local and international investors who are interested in entering Kenya’s banking industry. The entrance of new players is expected to contribute significantly to the country’s economic development by expanding access to financial services, particularly in underserved areas.
During the period of the moratorium, the number of commercial banks in Kenya reduced from 44 to 38, primarily due to mergers and acquisitions. Notable consolidations included KCB Group’s acquisition of the National Bank of Kenya, and Equity Group’s takeover of Spire Bank. These mergers were part of the CBK’s strategy to consolidate and strengthen the banking sector, ensuring that the remaining banks were well-capitalized and capable of serving the needs of the country’s growing economy.
The lifting of the moratorium is being viewed as a crucial step toward revitalizing the banking sector, which is in line with broader economic reforms taking place in Kenya. The country has long aspired to become a regional financial hub, and the opening up of the banking sector to new players is seen as a vital step in achieving this goal. By fostering greater competition and improving the sector’s regulatory environment, the CBK is setting the stage for Kenya to play a more prominent role in the regional and international financial markets.
The lifting of the moratorium shows the CBK’s confidence in the improvements made to the country’s banking regulations. The move signals that Kenya is ready for more players to enter the market, and that the country’s banking industry is strong enough to handle increased competition. It is expected that this policy change will have long-lasting positive effects on Kenya’s financial system and contribute to its continued economic growth.
