The Central Bank of Kenya (CBK) has announced it will officially lift the nearly decade-long moratorium on the licensing of new commercial banks, effective July 1, 2025. The moratorium, first imposed on November 17, 2015, was intended to stabilize the country’s banking sector during a period marked by governance and risk management concerns.
According to the CBK, the decision to lift the restriction follows significant reforms and progress in strengthening Kenya’s banking framework, including the introduction of more robust legal and regulatory structures. Over the years, the sector has also seen a wave of mergers, acquisitions, and new investments – both domestic and foreign – which have reshaped the industry landscape.
Why the Moratorium Was Imposed
In 2015, the CBK halted the licensing of new commercial banks in response to a series of banking failures and sector-wide instability. The pause allowed the regulator to focus on building a more resilient and well-governed financial system. The CBK’s move was widely seen as a measure to avert further systemic risks and address loopholes in banking oversight.
Since then, Kenya’s financial sector has undergone considerable transformation. Existing banks have consolidated through mergers and acquisitions, while policy and regulatory interventions have tightened sector controls.
Higher Capital Requirements Under New Law
A major factor in CBK’s decision to end the moratorium is the enactment of the Business Laws (Amendment) Act, 2024, which raised the minimum core capital requirement for commercial banks to KES 10 billion. This is a substantial increase from the previous requirement of KES 1 billion, and it signals a deliberate shift towards creating a stronger, better-capitalized banking industry.
Any institution seeking entry into the Kenyan banking sector from July 2025 will now have to demonstrate the ability to meet this capital threshold. The CBK says this requirement is designed to ensure that new entrants are financially sound and capable of operating sustainably in a competitive market.
Implications for the Banking Sector
The lifting of the moratorium opens up the Kenyan banking space to new players for the first time in almost ten years. While the new capital requirement is expected to deter weak or undercapitalized entrants, it could attract large local and international institutions with the capacity to meet the KES 10 billion bar.
CBK expects that stronger and more resilient banks will be better positioned to manage risks across global, regional, and domestic markets. Furthermore, these institutions will be expected to play a key role in financing large-scale national development goals, in line with Kenya’s economic aspirations.
What This Means for Digital Banking in Kenya
The reopening of Kenya’s banking sector comes at a time when digital banking is rapidly evolving — and its impact will be significant.
1. Accelerated Innovation and Digital-First Entrants
Kenya’s digital banking space has matured considerably, with mobile-first solutions like M-Pesa, Loop, and more already reshaping how consumers access financial services. With the moratorium lifted, we could see fully digital banks now applying for licenses.
Digital-first players offering low-cost, mobile-centric banking services may enter the market with fewer physical infrastructure costs but backed by strong capitalization. Expect more AI-driven customer experiences, embedded finance, and faster onboarding processes.
2. More Competition in the Fintech Ecosystem
Fintechs that previously partnered with licensed banks to operate may now seek their own banking licenses – provided they can raise KES 10 billion in capital. While the capital requirement is a high bar, well-funded fintechs or fintech consortiums (e.g., telco-backed or VC-backed startups) could pursue full banking licenses to gain more control over deposits, lending, and compliance.
This could shift the balance of power in Kenya’s financial services ecosystem, increasing competition for traditional banks and even reshaping how digital loans, savings, and investment products are offered.
3. Pressure on Traditional Banks to Digitize Faster
New digitally native banks with clean balance sheets and modern infrastructure could put significant pressure on legacy institutions to accelerate their digital transformation. Consumers have already shown a preference for app-based, fast, and low-fee services, and the arrival of agile competitors may force traditional banks to modernize faster.
4. Improved Regulatory Oversight and Stability
With the CBK now setting a higher bar for entry, even digital banks will need to meet stringent compliance and capital requirements. This is likely to weed out weaker players and ensure that only serious, well-governed digital banks are licensed – reducing risks like digital loan abuse, data breaches, or unsustainable lending practices.
Looking Ahead
With the CBK now reopening the door for new banking licenses, attention will likely shift to potential applicants, especially pan-African financial institutions, digital-first banks, and large foreign players looking to enter or expand in East Africa.
The move could stimulate innovation in financial services, particularly if new banks bring in fresh models such as digital-only banking, green banking, or specialized SME-focused services. However, CBK’s enhanced capital requirements and continued regulatory vigilance suggest that only the most serious and well-prepared players will be allowed to operate.
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