KENYA Trends and Developments Contributed by: Walid Khan, Africa Law Partners
Introduction The Banking and Finance sector in Kenya has under- gone several regulatory changes and other develop- ments over the past few months. These changes have resulted in far-reaching effects for the industry. This chapter of the guide aims to highlight some of these changes and some of their short-term effects. The Business Laws Amendment Act, 2024 The most significant regulatory impact has been the introduction of amendments to the Central Bank of Kenya Act through the Business Laws Amendment Act (2024) (BLAA). Passed in December 2024, these amendments were couched as legislation aimed at protecting consumers from overpriced short-term lenders. It introduced regulation of non-deposit tak- ing credit providers (NDTCPs) by the Central Bank of Kenya. These NDTCPs were not regulated and were not required to take licences in order to provide credit facilities to Kenyan borrowers. The BLAA, however, had seemingly unintended con- sequences. A strict interpretation of the broad defini- tion of NDTCPs would include foreign lenders such as climate funds, development finance institutions, foreign banks, investment banks, investment funds and other international lenders. Since the law does not exempt foreign lenders who are not established in Kenya, this creates the possibility that foreign lenders are now required to establish local presence in Kenya and obtain licences in order to lend to Kenyan entities. The effect of this law is profound. Foreign lenders are reticent to establish operations in Kenya solely for the purpose of lending to Kenyan entities. Additionally, such unpredictable regulatory changes render Kenya a hostile jurisdiction and deter foreign lenders from injecting their capital in Kenya. There are efforts by, amongst others, professionals in banking and finance to have the government intro- duce subsequent amendments to the Central Bank of Kenya Act to clarify that foreign entities are not NDTCPs requiring licences from the CBK to lend in Kenya.
Increased Minimum Capital Requirements The BLAA has also increased the minimum core capi- tal requirements for commercial banks to KES10 bil- lion, with banks required to meet these requirements incrementally by December 2029. The increase of core capital for banks will see increased pressure on smaller existing banks, which may result in more M&A activity and consolidation 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. 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 Stitching Rabo Bank Foundation v Ava Chem Limited & Another [2024] KEHC 9931 (KLR)) had held that, despite being reg- istered in a foreign jurisdiction, a foreign entity could not sue in Kenya without establishing a local pres- ence. The High Court made this decision on the basis of Section 974 of the Kenyan Companies Act, which prohibits foreign entities from “carrying on business” in Kenya unless they are registered locally. This provi- sion of the Companies Act does not, however, restrict foreign entities from access to Kenyan courts for want of local registration. This determination will boost foreign lender confi- dence as the determination in Stitching Rabo was to the effect 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
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