The Central Bank of Kenya (CBK) has announced the cancellation of Bank Al-Habib Ltd’s (BAHL) authority to operate a Representative Office in Kenya, marking the official exit of the Pakistan-based lender from the East African market. In a significant policy shift, CBK also revealed it will lift the nine-year moratorium on licensing new commercial banks, effective July 1, 2025.
These two landmark announcements come amid a broader effort by CBK to streamline Kenya’s banking sector and open up new opportunities for financial growth and competition.
Bank Al-Habib Closes Kenya Office After 7 Years
In a statement issued on Monday, June 30, CBK confirmed that the Banking Act license granted to Bank Al-Habib Ltd in 2018 to operate a representative office in Nairobi has been cancelled. The closure is voluntary, and the bank cited a strategic decision to rationalise its foreign operations as the primary reason for its exit from Kenya.
“The Central Bank of Kenya (CBK) announces the cancellation of the authority granted to Bank Al-Habib Ltd (BAHL) of Pakistan to operate a Representative Office in Kenya, pursuant to Section 43 of the Banking Act,” CBK stated.
The cancellation took effect on May 15, 2025.
Bank Al-Habib’s Kenya office, established on April 9, 2018, served primarily as a liaison and marketing outlet for the parent bank and its global affiliates. It was not authorized to engage in core banking activities, such as taking deposits or issuing loans, in accordance with Section 43 of the Banking Act.
Bank Al-Habib’s Global Footprint
Headquartered in Karachi, Pakistan, Bank Al-Habib Ltd is one of the country’s largest private commercial banks, with a branch network of over 1,000 outlets. It offers corporate and retail banking services, international trade finance, and investment services.
The Kenyan Representative Office was BAHL’s only outpost in East Africa and was part of the bank’s strategy to expand its global reach. The bank continues to maintain international operations in the United Arab Emirates, Bahrain, the United Kingdom, China, Turkey, and Afghanistan, among other financial hubs.
CBK emphasized that BAHL’s departure from Kenya was orderly, with no regulatory breaches, liquidity issues, or financial misconduct associated with the exit.
CBK Lifts 9-Year Freeze on New Bank Licensing
In a related announcement, CBK confirmed that it is officially lifting the moratorium on licensing new commercial banks, effective July 1, 2025. The licensing freeze was first introduced on November 17, 2015, to address a wave of instability and mismanagement in the Kenyan banking sector.
“The moratorium, which was imposed to provide space for strengthening governance and operations in the sector, will be lifted effective July 1,” CBK stated in an earlier press release dated April 16.
The move is seen as a vote of confidence in the resilience and maturity of Kenya’s banking ecosystem, which has undergone major reforms in the last decade.
Why the Moratorium Was Imposed
The 2015 decision to halt the licensing of new commercial banks came in the wake of multiple bank collapses, including the failures of Imperial Bank and Chase Bank, which shook public confidence and exposed serious flaws in risk management and governance.
At the time, CBK Governor Dr. Patrick Njoroge defended the moratorium as a temporary safeguard aimed at preventing systemic risk and restoring order.
Over the past nine years, CBK has spearheaded numerous reforms, including:
- Enhancing corporate governance standards
- Tightening risk-based supervision
- Promoting financial inclusion
- Encouraging consolidation of weaker banks
- Fostering fintech and digital innovation
The successful implementation of these measures paved the way for the reopening of the licensing window.
Market Reactions and Industry Outlook
Analysts expect a wave of interest from local and international investors seeking entry into the Kenyan financial space, which is widely regarded as one of the most dynamic and competitive in sub-Saharan Africa.
“Lifting the moratorium signals that Kenya is open for banking business again. We expect interest especially from digital banks, fintech companies, and regional players,” said Caroline Kamau, a banking analyst at Nairobi-based FinPoint Research.
However, CBK has indicated that new applicants will be subject to stringent vetting, and must meet the high standards set during the reform era.
“We are not going back to the old ways. Any new bank must demonstrate robust governance, risk management, and financial capacity,” CBK said in its earlier statement.
Implications for Consumers and the Economy
The re-entry of new banks into the market is expected to boost competition, potentially driving better interest rates, innovative products, and enhanced customer service. It also aligns with Kenya’s broader agenda of promoting financial inclusion, especially in underserved regions and among unbanked populations.
Meanwhile, the closure of Bank Al-Habib’s Nairobi office is unlikely to significantly affect the local banking landscape, as the lender was not offering core banking services and had a limited market presence.
Still, the exit reflects a broader trend of strategic repositioning by foreign banks, many of which are re-evaluating their African footprints amid global economic shifts and changing capital requirements.
Key Takeaways
- The Central Bank of Kenya (CBK) has cancelled the authority granted to Bank Al-Habib Ltd (BAHL) of Pakistan to operate in Kenya.
- The closure, effective May 15, 2025, follows BAHL’s decision to rationalise foreign operations and exit the Kenyan market.
- BAHL operated a Representative Office (not a full-service bank) in Kenya since 2018.
- CBK has also announced the lifting of a nine-year moratorium on the licensing of new banks, effective July 1, 2025.
- The moratorium had been in place since November 2015, following governance and management challenges in the sector.
- The policy shift is expected to stimulate growth, competition, and innovation in Kenya’s banking sector.