Report: Kenya’s Banking Sector Remains Strong as Capital Buffers Exceed Regulatory Minimums

Kenya’s banking sector ended 2024 on a resilient note, with capital buffers remaining well above regulatory requirements, according to the State of the Banking Industry Report 2025 released on Monday by the Kenya Bankers Association (KBA).

The industry’s Total Capital-to-Risk Weighted Assets ratio stood at 19.7 percent, surpassing the regulatory minimum of 14.5 percent, while the Core Capital-to-Risk Weighted Assets ratio was recorded at 17.4 percent, higher than the 10.5 percent requirement.

These levels, combined with steady liquidity, suggest that the banking sector has the strength to continue expanding credit sustainably to households, businesses, and government development programs.

“Strong capitalization, robust liquidity, and enhanced efficiency demonstrate that banks remain well-positioned to support credit expansion, digital innovation, and inclusive growth, said KBA Chief Finance Officer Kennedy Mutisya during the resilience demonstrated by the industry in 2024.

Kenya’s banks continued to make strides in digital transformation over the past year, and among the key milestones were the adoption of the ISO 20022 messaging standard and the development of a nationwide Fast Payment System, both of which are expected to enhance transaction efficiency and strengthen Kenya’s standing as a leading regional financial hub.

Industry initiatives such as the launch of Pesalink and upgrades to the National Payments System have already laid the foundation for faster, safer, and more affordable financial transactions.

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“The year 2024 underscored the resilience of Kenya’s banking sector and its capacity to play a catalytic role in our country’s economic transformation,” Mr. Mutisya added, noting that the modernization of payments systems has been a critical step in positioning the industry for the future.

Despite the positive outlook, the report points to lingering challenges, particularly elevated levels of non-performing loans and rising funding costs, which remain key concerns for banks and regulators.

Nonetheless, the sector’s fundamentals remain sound, with strong capitalization and prudent governance structures ensuring that financial institutions are able to balance profitability with their broader role in supporting national development.

According to the report, the industry’s ability to maintain resilience in the face of macroeconomic headwinds demonstrates its stability and long-term viability.

With assets exceeding Ksh.7.7 trillion across 46 member institutions, the banking sector is seen as a critical driver of economic growth, not only in financing businesses and households but also in advancing innovation, fostering financial inclusion, and building confidence in Kenya’s financial system.

The State of the Banking Industry Report 2025 serves as a reference point for policymakers, investors, and the general public, offering a comprehensive review of performance trends, regulatory shifts, and economic conditions.