KENYA Law and Practice Contributed by: Walid Khan, Ruth Wangui Rukwaro and Christina Wanjiku Wood, Africa Law Partners
Africa Law Partners No 7, Swiss Cottages Ring Road, Riverside PO Box 14008-0080 Nairobi Kenya Tel: +254 798 041 507 Email: info_ke@africalawpartners.com Web: www.africalawpartners.com
1. Loan Market Overview 1.1 The Regulatory Environment and Economic Background The Business Laws Amendment Act, 2024
Recent Court Decisions In the case of Bruton Gold Trading LLC v Anne Atieno Amadi & Others (HCCC No E211 of 2023), the High Court of Kenya issued a welcome ruling to the effect that non-registered foreign entities can pursue legal remedies in Kenyan courts. A previous High Court decision (in Stichting Rabo Bank Foundation v Ava Chem Limited & Another [2024] KEHC 9931 (KLR)) had held that, despite being registered in a foreign jurisdiction, a foreign entity could not sue in Kenya without establishing a local presence. This determi- nation will boost foreign lender confidence as the determination in Stitching Rabo implied that all foreign entities (despite not having local operations) ought to register in Kenya in order to have access to Kenyan courts. Lifting of Moratorium on Licensing of New Commercial Banks On 16 April 2025, the CBK announced that it would lift the moratorium on licensing of new commercial banks from 1 July 2025. The moratorium had been in place from 17 November 2015 and was placed as a backdrop of governance, risk management and operational challenges in the banking sector. It was intended to provide space for the strengthening of the Kenyan banking sector. The moratorium has since been lifted due to the new capital requirements for banks, increased M&A and strengthening of banks’ positions, and the entry of strategic foreign investors.
Recent changes to the regulatory environment have significantly affected the direction and trends of the loan market in Kenya. In December 2024, Kenya enact- ed the Business Laws (Amendment) Act, 2024 which expanded the Central Bank of Kenya’s (CBK) mandate in regulating credit providers to include the regulation of non-deposit taking credit providers, which arguably extends to foreign lenders offering debt to Kenyan entities. Such lenders are now required to register a local presence in Kenya and obtain a licence from the CBK. This has, though seemingly inadvertently, resulted in reduced access to foreign debt investment and international credit to Kenyan entities, as obtain- ing such a licence is expensive and time consum- ing. Moreover, it would be impractical for non-Kenyan lenders to establish a local presence in Kenya and obtain a licence only for the purpose of lending to a few Kenyan entities. The said Act has also increased the minimum core capital requirements for commercial banks to KES10 billion by December 2029. The increase of core capital for banks will see increased M&A activity and consoli- dation between banks in Kenya. This increase in core capital could see the exit of banks that do not have additional appetite to expand in the Kenyan market, by offloading their positions to banks with stronger positions in the market.
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