By The Weekly Vision Business Reporter
Kenya’s banking sector is absorbing a quiet but significant regulatory shift that could reshape the cost of doing business for lenders and, ultimately, for their customers. The Banking (Fees) Regulations, 2026, gazetted under Legal Notice No. 81 and effective from 8th May 2026, replace a fee structure that had remained largely unchanged since 1994.
Under the old regime, institutions paid fixed annual licence fees linked primarily to the number and location of branches, a model that capped even the largest lenders’ liability at around KSh400,000 a year. The new rules tie the annual fee to a percentage of gross annual revenue: 0.13 per cent for the 2026 financial year, rising to 0.14 per cent in 2027 and settling at 0.15 per cent from 2028 onwards.
Gross annual revenue is defined broadly to include interest income, fees and commissions, foreign-exchange earnings, dividends and other income reported in audited financial statements. New entrants to the market will pay on the basis of projected average revenue for their first three years of operation.
Central Bank of Kenya Governor Kamau Thugge has defended the overhaul as a necessary modernisation. Appearing before the National Assembly’s Committee on Delegated Legislation, he argued that the previous model had become outdated in a sector transformed by digital banking, regional expansion and vastly higher revenues, and that a flat fee capped at KSh400,000 no longer reflected the scale or complexity of contemporary banking operations.
Committee members questioned the legal basis for the new levy, observing that the term “banking fees” does not appear in the Banking Act, and warned that the revenue-based charge could increase the overall cost of banking services for customers.
One illustration circulated during the hearings put the scale of the shift into perspective: a large institution with KSh50 billion in gross annual revenue would face an annual licence fee of approximately KSh65 million in 2026 under the 0.13 per cent rate, a figure set to rise further once the full 0.15 per cent rate takes effect from 2028. Failure to pay by the 31st December deadline attracts a 100 per cent penalty, with continued non-payment risking licence revocation, a consequence with obvious implications for investor confidence in any affected institution.
The practical downstream effects remain thinly examined. Larger banks, which generate the bulk of sector revenue, will bear the heaviest absolute burden. Whether they absorb the cost as a business expense, pass it on through higher account maintenance charges, transaction fees or lending margins, or seek efficiencies elsewhere in their operations, is still an open question that will shape retail and corporate banking costs alike.
Smaller and mid-tier lenders face a different calculus. Although their percentage liability is identical, the absolute sums may prove more onerous relative to thinner balance sheets, potentially affecting their ability to compete on price or fund expansion plans, a dynamic worth watching for its implications on competition within the sector.
Competition dynamics, the pricing of everyday banking products, and the cumulative impact on customers already facing sticky lending rates have received limited sustained scrutiny beyond the parliamentary exchanges. For businesses and households already absorbing a lending environment where rate cuts have been slow to filter through, a new revenue-linked levy on their banks is a cost worth tracking, particularly if it surfaces in tariff guides and fee schedules over the coming financial year.
The Weekly Vision will continue to monitor early signals of cost pass-through in published bank tariffs, and how the new fee regime compares in practice between top-tier and smaller lenders, as the first payment deadline under the new rules approaches.
