Kenya’s Banking Sector Set for Shake-Up as Mergers and Acquisitions Accelerate

Kenya’s banking sector is poised for renewed consolidation as the industry braces for a steep increase in minimum capital requirements and seeks to tap into the country’s underdeveloped financial potential.

Mobile-driven growth is powering digital transformation, with the Communications Authority of Kenya reporting 71.4 million active SIM cards as of December 2024—a penetration rate of 138.5 percent. Mobile internet subscriptions stood at 56.1 million, with mobile broadband accounting for 78.4 percent of the total.

Mobile money subscriptions reached 42.3 million, translating to a globally high penetration rate of 82.1 percent.

Despite this growth, Kenya’s banking sector remains relatively shallow. According to the World Bank, domestic credit to the private sector by banks stood at just 31.63 percent of GDP in 2023—well below figures in more developed markets such as Hong Kong (248.75 percent), China (194.67 percent), and the United States (192.5 percent).

South Africa, at 90.54 percent, and Mauritius, at 67.16 percent, also significantly outpace Kenya.

Similarly, the IMF estimates Kenya’s gross national savings and total investment as a share of GDP at 12.95 percent and 16.67 percent, respectively, in 2024. In comparison, China’s savings and investment shares of GDP stand at 42.68 percent and 40.42 percent.

To bridge this gap, stakeholders are calling for a deeper savings culture, supported by robust banking, pensions, insurance and capital markets.

In a bid to strengthen the banking system’s stability and resilience, the Central Bank of Kenya (CBK) has unveiled a phased increase in minimum core capital From the current KES 1 billion, the threshold will rise to KES 3 billion by 2025, KES 5 billion by 2026, KES 6 billion by 2027, KES 8 billion by 2028 and KES 10 billion (USD 77.38 million) by 2029.

The regulatory shift is expected to trigger a new wave of mergers and acquisitions (M&A), as smaller banks struggle to meet the capital requirements, while foreign institutions eye Kenyan targets as affordable entry points.

By comparison, Nigeria recently raised its capital requirement for international banks to NGN 500 billion (USD 320 million), raising barriers to entry but positioning its domestic lenders for international expansion.

Banks typically pursue M\&A activity to achieve inorganic growth—expanding market share, customer base, loan portfolios, and distribution networks. Other motivations include acquiring new technologies, expanding into regional markets, and complying with regulatory mandates, as seen in UBS’s 2023 acquisition of Credit Suisse.

PwC outlines five key stages in the M\&A process: preliminary assessment and review of information memorandum; negotiation of a non-binding letter of intent; comprehensive due diligence covering legal, financial, credit, HR, ICT and strategic areas; negotiation and regulatory approvals (including central banks, competition authorities and treasuries); and finally, execution of a share or asset purchase agreement followed by integration.

Kenya has seen a series of notable banking mergers and acquisitions since 2010. In that year, Savings and Loan merged into KCB, City Finance into Jamii Bora, and Southern Credit Banking Corporation into Equatorial Commercial Bank.

In 2019, NIC Group merged with Commercial Bank of Africa to form NCBA.

Several regional and international transactions have followed. I&M Bank acquired Rwanda’s Banque Commerciale du Rwanda (BCR) in 2012 and later Uganda’s Orient Bank in 2021.

Guaranty Trust Bank of Nigeria acquired Fina Bank in 2013. Prime Bank and First Merchant Bank led acquisitions in Botswana, Zambia, Mozambique, Malawi, and Zimbabwe between 2008 and 2017.

Centum acquired K-Rep Bank in 2014, rebranding it as Sidian Bank, while Mwalimu Sacco acquired Equatorial Commercial Bank, later renamed Spire Bank. Equity Bank expanded into the Democratic Republic of Congo (DRC) in 2015 by acquiring ProCredit Bank, later merging it with BCDC in 2020 to form Equity BCDC.

The lender also acquired Spire Bank (Kenya) and Cogebanque (Rwanda) in 2023.

KCB’s regional expansion included acquiring National Bank of Kenya in 2019 (sold to Access Bank Nigeria in 2025), Transnational Bank in 2020, and Banque Populaire du Rwanda (BPR) in 2021, which merged with KCB Bank Rwanda to form BPR Bank Rwanda.

It also acquired Trust Merchant Bank (TMB) in the DRC in 2022.

Other significant deals include State Bank of Mauritius’ acquisition of Fidelity Commercial Bank (2017) and Chase Bank (2018); Diamond Trust Bank’s takeover of Habib Bank Kenya (2017); Cooperative Bank’s acquisition of Jamii Bora, rebranded to Kingdom Bank (2020); and Commercial International Bank of Egypt’s acquisition of Mayfair Bank (2020).

In the microfinance sector, Old Mutual acquired Faulu Kenya in 2013. Salaam African Bank of Djibouti purchased Uwezo Microfinance in 2021, and digital lender Branch International acquired Century Microfinance Bank in 2022.

That same year, LOLC Mauritius acquired Key Microfinance Bank, and in 2023, UMBA Inc acquired Daraja Microfinance Bank, while Cactus Cantina Investments took over Maisha Microfinance Bank.

As capital requirements tighten and digital channels expand, the pace of banking consolidation in Kenya is expected to accelerate. The sector is on the brink of transformation—shaped by regulation, regional ambitions, and the search for scale.

Mr Migwi is member of the Institute of Directors of Kenya, Economists Society of Kenya, Kenya Institute of Bankers , Kenya Institute of Management and World Economics Association.