Evolution of the Financial Sector in Kenya

Abstract

Kenya’s financial system has evolved over the last 50 years, having experienced many setbacks, innovations, successes, and radical transformation in terms of services and products, policies, regulatory frameworks, and linkages. The evolution reflects ever-changing consumer needs, alignment with global standards, and growing complexity. The financial system has become highly interconnected, grown exponentially, expanded across the East African region, and become highly integrated to the real economy. Banking industry however remains the largest in terms of share of assets to nominal GDP, but declining. Adoption of digital financial services continues to create opportunities through new products, innovations, and delivery channels, thus enhancing in-country and cross-border integration. Continued policy and regulatory reforms anchored in Kenya’s Vision 2030 and EAC Customs Union Protocol will further upscale the system to global standards. However, regulators and policy makers are aware of possible risks to the system stability and stand ready to take mitigation measures.