The Central Bank of Kenya (CBK) has announced a significant policy shift that will see the lifting of the nine-year moratorium on the licensing of new commercial banks. This decision, set to come into effect on July 1, 2025, is expected to bring about a new era of competition, innovation, and capital infusion within Kenya’s banking industry.
The moratorium, which was initially put in place on November 17, 2015, was implemented to address various systemic issues such as governance weaknesses, risk management concerns, and operational inefficiencies within the banking sector. The regulator had emphasized the need for a pause to strengthen the sector’s institutional and regulatory frameworks.
The decision to lift the freeze on licensing new commercial banks reflects the CBK’s confidence in the sector’s enhanced resilience and regulatory maturity. This move follows a decade of significant reforms that have seen the strengthening of legal frameworks, improved supervision, and a wave of consolidations within the industry.
Over the years, Kenya’s banking sector has undergone notable transformations, including an increase in mergers and acquisitions, as well as the entry of foreign strategic investors who have injected vital capital and expertise into the market.
“The moratorium was put in place to allow for the fortification of the Kenyan banking sector,” stated the CBK in a release dated April 16, 2025. “Considerable progress has been made in strengthening the legal and regulatory framework for Kenya’s banking industry.”
Recent legislative amendments, such as the Business Laws (Amendment) Act of 2024, which raised the minimum core capital requirement for commercial banks to Ksh.10 billion, have played a crucial role in the decision to lift the freeze. This step is aimed at promoting financial stability and enhancing investor confidence.
Prospective entrants into Kenya’s banking industry will now be required to demonstrate their ability to meet the enhanced minimum capital threshold of Ksh.10 billion. This requirement is intended to ensure that only well-capitalized and resilient institutions are allowed to operate in the market.
The lifting of the licensing freeze is expected to attract both local and international financial institutions seeking to enter East Africa’s most vibrant economy. Kenya’s strategic position as a regional financial hub, coupled with a growing middle class and increasing demand for credit, makes it an appealing destination for banking investment.
This move is anticipated to drive competition and innovation in the sector, particularly in digital banking and financial technology. New market entrants are likely to bring global best practices, improved customer service models, and increased access to credit, especially for small and medium-sized enterprises (SMEs) that face challenges with traditional financing options.
Moreover, this decision aligns with the government’s broader economic objectives, including Vision 2030 and the Bottom-Up Economic Transformation Agenda (BETA), both of which prioritize inclusive growth and access to financial services.
Dr. Jane Mugo, a financial analyst based in Nairobi, highlighted the strategic timing of this decision, stating, “With heightened capital requirements and a clearer regulatory framework, the CBK is signaling that Kenya is open for business but only to serious players. This will weed out undercapitalized entities while fostering sustainable growth.”
Kenya’s move is expected to have a ripple effect across the East African region, influencing policy decisions in neighboring countries and attracting cross-border interest from East African Community (EAC) partners. With increased regional integration and the expansion of financial services across borders, this development could pave the way for greater alignment in banking regulations and supervision, leading to a more unified regional financial system.
