In a major policy shift aimed at revitalizing the financial sector, the Central Bank of Kenya (CBK) has revealed that it will lift its nine-year moratorium on the licensing of new commercial banks. This change, set to take effect on July 1, 2025, is expected to usher in a new period of competition, innovation, and capital infusion within Kenya’s banking industry.
The moratorium, which has been in place since November 17, 2015, was initially introduced to tackle various systemic issues, including governance weaknesses, risk management concerns, and operational inefficiencies within the banking sector. At the time, the regulator emphasized the need for a pause to strengthen the sector’s institutional and regulatory frameworks.
CBK’s decision to lift the freeze on licensing new commercial banks signals confidence in the sector’s enhanced resilience and regulatory maturity. This announcement follows a decade of significant reforms, which involved the strengthening of legal frameworks, improved supervision, and a wave of consolidations.
Since the moratorium was introduced, Kenya’s banking sector has undergone considerable transformation. These changes include a noticeable rise in mergers and acquisitions, along with an influx of foreign strategic investors who have brought in vital capital and expertise to the market.
“The moratorium was meant to create space for the fortification of the Kenyan banking sector,” the CBK stated in its release dated April 16, 2025. “Significant progress has been made in bolstering the legal and regulatory framework for Kenya’s banking industry.”
The regulator also highlighted recent legislative amendments as a key driver in lifting the freeze. Specifically, the Business Laws (Amendment) Act of 2024 increased the minimum core capital requirement for commercial banks to Ksh.10 billion, a step aimed at promoting financial stability and boosting investor confidence.
As part of the new licensing framework, prospective entrants into Kenya’s banking industry must prove they can meet the enhanced minimum capital threshold of Ksh.10 billion. This requirement is seen as a measure to ensure that only well-capitalized and resilient institutions are permitted to operate within the market.
“This will further enhance the strength of the banking sector,” noted the Central Bank of Kenya (CBK). “More robust and resilient banks will be better equipped to manage the growing risks in global, regional, and domestic markets.”
Experts believe that the move will likely attract both local and international financial institutions looking to enter East Africa’s most vibrant economy. Kenya’s strategic role as a regional financial hub, coupled with a rising middle class and an increasing demand for credit, makes it a highly attractive destination for banking investment.
The lifting of the licensing freeze is expected to intensify competition and drive innovation, particularly in digital banking and financial technology. New market entrants could bring global best practices, enhanced customer service models, and increased access to credit, especially for small and medium-sized enterprises (SMEs) that often struggle with traditional financing options.
Additionally, this move aligns with the government’s broader economic goals, 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, pointed out that the timing of this decision was strategic: “With heightened capital requirements and a clearer regulatory framework, the CBK is sending a strong signal that Kenya is open for business—but only to serious players. This will eliminate undercapitalized entities while promoting sustainable growth.”
Kenya’s decision is also expected to have a ripple effect throughout the East African region. As the largest economy in the bloc, Kenya often sets the standard for financial and regulatory practices. The reopening of the banking licensing process could influence policy decisions in neighboring countries and attract cross-border interest from East African Community (EAC) partners.
Furthermore, with growing regional integration and the expansion of financial services across borders, this development could foster greater alignment in banking regulations and supervision, paving the way for a more unified regional financial system.
