The nine largest banks operating in Kenya have further entrenched their dominance in the financial sector, capturing nearly 90 percent of the industry’s profitability in 2024, a sign of growing market concentration that threatens competition and consumer choice.
The 2024 Banking Supervision Report by the Central Bank of Kenya (CBK) shows that the pre-tax profit of the sector rose to Sh260 billion last year, up from Sh219.2 billion in 2023, with the top-tier lenders scooping a massive 89.3 percent of the earnings in the review period.
This marks a significant jump from 84.7 percent the previous year.
Medium-sized banks meanwhile saw their share shrink to 10.2 percent, down from 13.6 percent in 2023, while small lenders’ share plunged to just 0.5 percent, from 1.7 percent.
The data underscores a continuing shift in Kenya’s banking landscape, where the gap between the large lenders and the rest is rapidly widening.
Tier-one banks like KCB Bank Kenya, Equity Bank Kenya, NCBA Bank Kenya, Standard Chartered Bank Kenya, and Co-operative Bank of Kenya have benefitted from economies of scale.
This allows them to incur a relatively smaller cost base compared to their revenue which they derive from lending and transactions with millions of customers, government entities and private firms.
Their robust digital infrastructure —including mobile banking to cross-- have further cemented their market share.
These lenders also dominate the government securities market and often serve as lead arrangers in syndicated loans, including public-private partnerships.
Their sheer balance sheet size has given comfort to depositors, especially after the collapse of Chase Bank and Imperial Bank almost a decade ago.
These failures eroded trust in smaller lenders, prompting a flight of deposits to larger banks seen as “too big to fail.” That depositor confidence continues to weigh heavily on smaller banks.
On the other hand, many small banks are facing some sort of an existential crisis. Several of them are struggling to meet key regulatory thresholds, including the minimum capital requirement of Sh1 billion, the capital adequacy ratio of 14.5 percent, and the liquidity ratio of 20 percent.
Things might get worse for them after the government increased the minimum absolute core capital requirement for the local banks over the next five years ten-fold to Sh10 billion in what “is likely to accelerate banking sector consolidation,” according to Fitch Ratings.
These constraints have limited the ability of small banks to grow their loan books or compete effectively for deposits, locking them into a vicious cycle of low earnings and regulatory non-compliance.
With limited branch networks and undeveloped digital infrastructure, they have also failed to capture the fast-growing retail and SME segments.
The CBK, which recently lifted the moratorium on registration of new banks, is wary of rising market concentration, where a few dominant players can influence interest rates.
The financial regulator reckons that such a situation of market concentration is bad for consumers who benefit from a competitive environment where banks innovate and offer lower fees.
In the end, unless smaller lenders find creative ways to scale up —through partnerships, niche specialisation, or mergers— the Kenyan banking sector risks becoming a playground for a powerful few.
