After nearly a decade, the Central Bank of Kenya (CBK) will lift its moratorium on licensing new commercial banks, effective July 1, 2025. The moratorium, in place since November 17, 2015, was introduced to address governance, risk management, and operational challenges in the banking sector. It was meant to give the industry time to stabilise under tighter regulation. With the sector now stronger and more resilient, CBK believes the time is right to open the door for new players.

There are several possible benefits. More banks could mean more competition, which may lead to better services for consumers, lower interest rates, and improved customer experience. New entrants might complement current efforts to serve the underbanked regions and groups, supporting greater financial inclusion in rural and informal markets. Some may bring in foreign capital and global best practices, which could raise the overall quality and stability of the industry. The decision also sends a strong signal of confidence in Kenya’s financial system. Investors may view it as a sign that the economy is stable and predictable, boosting investor sentiment not only in banking but across other sectors as well.

However, the move is not without its risks. Critics question the timing of such an initiative. Just months ago, the Business Laws (Amendment) Act, 2024, raised the minimum core capital for new banks to Ksh10 billion, a steep requirement that effectively locks out most local entrepreneurs, cooperatives, and grassroots initiatives. In reality, only wealthy investors and foreign firms are likely to meet this bar. So while the door appears open, it may only be open to the rich. This raises an important question about who stands to benefit from this change. The move could also pave the way for foreign banks to dominate the market. High capital requirements and relaxed licensing might attract large international players, crowding out smaller local banks and shifting financial power further away from local communities.

That said, CBK has gained experience and capacity over the past decade. It has tightened its oversight, improved regulatory tools, and shown a willingness to act when needed. This should help prevent instability and ensure that only serious, capable players are licensed. In the bigger picture, lifting the moratorium is both symbolic and strategic. It reflects CBK’s confidence in the sector and the progress made over the past years. It also recognises that the industry must continue to evolve to meet changing risks, consumer needs, and development goals.

As July 2025 approaches, attention will turn to the first applicants and what they bring to the table. New players will help shape the next chapter of Kenya’s financial landscape. Ultimately, reopening the sector to new banks shows that steady reform can lead to meaningful progress. The challenge now is to manage that progress carefully, encouraging innovation and investment, while protecting the stability and trust that the industry has worked so hard to rebuild.