In a significant policy shift aimed at revitalising the financial sector, the Central Bank of Kenya (CBK) has announced that it will lift its nine-year moratorium on the licensing of new commercial banks. The move, set to take effect on July 1, 2025, is expected to usher in a new era of competition, innovation, and capital injection in Kenya’s banking landscape.
The moratorium, which has been in place since November 17, 2015, was initially imposed to address a range of systemic challenges, including governance weaknesses, risk management concerns, and operational inefficiencies within the banking sector. At the time, the regulator cited the need for a pause to strengthen the sector’s institutional and regulatory frameworks.
CBK’s decision to end the freeze on the licensing of new commercial banks reflects confidence in the sector’s improved resilience and regulatory maturity. The announcement comes against the backdrop of sweeping reforms over the last decade, which included enhanced legal frameworks, tighter supervision, and a wave of consolidations.
Since the imposition of the moratorium, Kenya’s banking sector has undergone transformative changes. These include a notable uptick in mergers and acquisitions, as well as an influx of foreign strategic investors who have injected much-needed capital and expertise into the market.
“The moratorium was intended to provide space for the strengthening of the Kenyan banking sector,” the CBK said in its statement dated April 16, 2025. “Significant strides have been made in strengthening the legal and regulatory framework for Kenya’s banking sector.”
The regulator also pointed to recent legislative amendments as a catalyst for lifting the freeze. Notably, the Business Laws (Amendment) Act of 2024 raised the minimum core capital requirement for commercial banks to Ksh.10 billion—a move designed to encourage financial stability and bolster investor confidence.
Under the new licensing regime, prospective entrants into Kenya’s banking sector will be required to demonstrate their ability to meet the enhanced minimum capital threshold of Ksh.10 billion. This condition is seen as a measure to ensure that only well-capitalised and risk-resilient institutions are allowed to operate in the market.
“This will further reinforce the strengthening of the banking sector,” CBK noted. “Stronger and more resilient banks will be able to navigate the growing risks in the global, regional, and domestic arenas.”
Analysts suggest that the move is likely to attract both local and international financial institutions seeking entry into East Africa’s most dynamic economy. Kenya’s strategic position as a regional financial hub, coupled with a growing middle class and increased demand for credit, makes it an attractive destination for banking investment.
The lifting of the licensing moratorium is expected to boost competition and spur innovation, especially in digital banking and financial technology. New players may bring with them global best practices, improved customer service models, and expanded access to credit, particularly for small and medium-sized enterprises (SMEs) which often face barriers to traditional financing.
Moreover, the move aligns with the government’s broader economic agenda, including Vision 2030 and the Bottom-Up Economic Transformation Agenda (BETA), which emphasise inclusive growth and access to financial services.
Dr. Jane Mugo, a Nairobi-based financial analyst, said the timing of the move was strategic: “With enhanced capital requirements and a clearer regulatory framework, the CBK is sending a strong message that Kenya is open for business—but only for serious players. This will filter out undercapitalised entities while encouraging sustainable growth.”
Kenya’s decision is also likely to have ripple effects across the East African region. As the largest economy in the bloc, Kenya often sets the tone for financial and regulatory standards. The re-opening of the banking licence window may influence policy decisions in neighbouring markets and attract cross-border interest from East African Community (EAC) partners.
Furthermore, with increasing regional integration and expansion of financial services across borders, the development could foster greater harmonisation in banking regulation and supervision, paving the way for a more cohesive regional financial system.
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