Key takeaways:
- Kenya has replaced its 1994 flat-fee bank licensing model with a new fee structure based on gross annual revenue
- The new rate will be staggered over four years, rising from 0.13% in 2026 to 0.15% from 2028 onward
- The old model charged banks fixed fees per branch, a structure regulators say had been overtaken by the shift to digital banking
Kenya has overhauled how it charges banks for operating licences, replacing a 32-year-old flat-fee model with a new structure tied to each institution’s gross annual revenue.
The Central Bank of Kenya published the new rules, the Banking (Fees) Regulations, 2026, in the Kenya Gazette on May 8 as Legal Notice 81 of 2026. The regulations took effect the same day and formally revoke the Banking (Fees) Regulations, 1994, which had governed licensing fees since then.
Under the new framework, annual fees will be calculated as a percentage of an institution’s gross annual revenue, phased in over four years. The rate starts at 0.13% in 2026, rises to 0.14% in 2027, and settles at 0.15% from 2028 onward. The regulations define gross annual revenue broadly.
It “includes the income from interest on loans, advances, government securities and placements, income on fees and commissions on loans and advances, dividend income, foreign exchange trading income, and any other income,” based on an institution’s audited and published financial statements for the preceding year, according to the regulations.
The regulations state that institutions newly granted a licence must pay fees based on their average projected gross annual revenue for the first three years of operation, before shifting to fees calculated from actual audited revenue.
All fees are now to be remitted to the Central Bank as a lump sum, and institutions that miss payment deadlines will be liable to pay double the annual fee within 90 days, or risk having their licence revoked.
How the old fee model worked
The 1994 regulations charged banks flat fees tied to their physical footprint rather than their size or earnings.
Institutions paid Ksh400,000 ($3,096) upon being granted a licence and on each anniversary of that licence, plus additional fees per branch: Ksh150,000 ($1,161) for branches within a municipality, Ksh100,000 ($774) within a town council area, and Ksh30,000 ($232) within an urban council area.
That structure meant a bank’s licensing costs were determined largely by how many physical branches it operated and where they were located, regardless of the institution’s actual revenue or scale of operations.
Why the shift matters for Kenya’s banks
The move away from a branch-based fee model reflects how Kenyan banks have restructured their operations over the past decade, leaning increasingly on agency banking, mobile banking and online channels rather than expanding physical branch networks.
A flat, branch-based fee structure had become a weaker proxy for an institution’s actual size or activity as digital distribution became the primary channel for many lenders.
The shift to revenue-based fees also changes the economics of licensing for Kenya’s largest banks. Under the 1994 model, flat fees represented a negligible cost for large institutions relative to their overall revenue.
Tying fees to gross annual revenue instead means the country’s biggest lenders will now pay licensing costs that scale with their actual earnings, a more direct link between size and regulatory cost than the old per-branch charges allowed.
The Central Bank, however, has not indicated whether further adjustments to the fee structure are planned beyond the phased increase to 0.15% in 2028, which the regulations set as the rate going forward without a specified end date.
