Introduction
The Central Bank of Kenya's Bank Supervision Annual Report 2024 provides a comprehensive overview of the banking sector's structure, performance, developments and regulatory framework in Kenya.
Key highlights include:
Structure of the Banking Sector (as of December 2024)
- Total institutions: 38 commercial banks, 1 mortgage finance company, 1 mortgage refinance company, 10 foreign bank representative offices, 14 microfinance banks (MFBs), 3 credit reference bureaus (CRBs), 26 money remittance providers (MRPs), 8 non-operating bank holding companies, 85 digital credit providers (DCPs), 81 forex bureaus.
- Ownership: 37 privately owned banks (20 local, 17 foreign-owned), 2 public institutions.
- Market share: Large banks accounted for 75.6% of the market share with 9 institutions; medium banks 16.7% with 9 institutions; small banks 7.7% with 21 institutions.
- ATM network grew marginally to 2,289 ATMs.
- Microfinance banks experienced a 9.8% decline in total assets to Ksh. 57.9 billion with reduced net advances by 16.8%.
- Forex bureaus increased to 81 with 163 outlets majorly in Nairobi.
- Money Remittance Providers increased to 26, with 72 outlets.
Developments in the Banking Sector
- Economic backdrop: Global tensions and subdued domestic consumer demand but with a relatively stable macroeconomic environment.
- Regulatory reforms in 2024 focused on increasing minimum core capital for commercial banks to Ksh. 10 billion by 2029, improved penalties, and incorporation of climate-related risk frameworks.
- Digital and technological innovations include increased usage of AI, Open Finance frameworks and blockchain initiatives.
- Mobile money subscriptions and transactions grew, with 42.3 million mobile money subscriptions and monthly transaction values around Ksh.724.8 billion in 2024.
- New product approvals (28 new products) and increased employee efficiency with average deposit accounts per employee rising.
- Transition from LIBOR to alternative reference rates nearly complete.
- Innovations targeting MSMEs focusing on AI-driven credit scoring, personalized products, and cloud-based scalability.
Macroeconomic Conditions & Sector Performance
- GDP growth decelerated to 4.7% in 2024 from 5.7% in 2023, with sectoral contractions in construction and mining.
- Inflation declined significantly from 9.6% in 2022 to 3.8% (May 2025).
- Exchange rate stabilized and strengthened at Ksh.134.8 per USD (2024 average).
- Interest rates declined slightly with Central Bank Rate lowered to 11.25%.
- Banking sector profitability increased by 18.2% to Ksh. 260 billion pre-tax profits.
- Total net assets slightly decreased by 1.6% to Ksh.7.6 trillion.
- Asset quality weakened with gross NPLs ratio increasing from 15.6% to 17.1%.
- Capital adequacy remains strong with total capital to risk-weighted assets at 19.6%, above the 14.5% minimum.
- Liquidity ratios improved to an average of 56.0%, exceeding the 20% minimum.
Supervisory Framework & Reforms
- The Business Laws (Amendment) Act 2024 increased minimum core capital for banks progressively to Ksh.10 billion by 2029.
- Amendments to the banking, microfinance and central bank acts enhanced regulatory scope including non-deposit credit providers and credit guarantee businesses.
- FATF grey-listing prompted enhanced AML/CFT reforms, automation of supervisory returns and development of virtual assets regulations.
- CBK implemented an Enterprise Data Warehouse and Granular Data Integration for real-time data surveillance.
- Continued emphasis on Credit Information Sharing frameworks to improve risk-based credit pricing and MSME access.
Regional and International Initiatives
- Active participation in East African Community (EAC) Monetary Affairs Committee and initiatives for East African Monetary Union.
- Engagements in COMESA, ESAAMLG on AML/CFT measures and capacity building collaborations with IMF AFRITAC and AFRACA.
- Collaboration with European Investment Bank on green finance initiatives and Network for Greening the Financial System membership.
- Hosting and participating in multiple knowledge exchange programs with African and international regulators.
- Kenyan banks continued regional expansion with a presence in multiple EAC countries and DRC, though with some branch rationalization.
Sector Highlights
- Large banks dominate with 75.6% market share and large pre-tax profits.
- Microfinance banks reported sector losses with reduced lending and capital adequacy below required minimums.
- Digital Credit Providers expanded rapidly with a 91% growth in gross outstanding loans to Ksh. 55.2 billion.
- Mortgage refinance efforts through KMRC advanced, promoting affordable housing finance.
This report underscores a stable but challenging environment with ongoing regulatory strengthening; digital innovation advancement and regional integration efforts aimed at fostering a resilient and inclusive banking sector in Kenya
References
– Bank Annual Supervision Annual Report 2024
