East African banking regulators are tightening rules on capital, risk management, and operational oversight as market structures evolve and foreign investment flows increase. Kenya, Uganda, and Ethiopia illustrate contrasting approaches to sector growth, consolidation, and liberalization, shaping how banks operate across the region. As of early 2026, Kenya hosts 38 commercial banks, Uganda has 22 following consolidation, and Ethiopia reports 32 commercial banks, mostly locally owned.
1. Minimum Capital Requirements
- Kenya: The Central Bank of Kenya (CBK) requires commercial banks to hold a minimum core capital of KES 10 billion ($77 million) under the Business Laws (Amendment) Act 2024. Banks were expected to reach KES 3 billion by December 31, 2025, with incremental increases to enhance capacity for large-scale lending.
- Uganda: The Financial Institutions Instrument 2022 mandates Tier 1 banks to maintain UGX 150 billion ($40 million) in core capital. Several institutions, including Finance Trust Bank and ABC Capital Bank, were reclassified to Tier II Credit Institutions in April 2026, which restricts activities such as offering current accounts or participating in cheque clearing.
- Ethiopia: New commercial banks must hold ETB 5 billion ($36 million) and adhere to a Risk-Based Capital Adequacy framework under Directive SBB/95/2025. By the end of 2026, all Ethiopian banks must maintain a total capital ratio of 11% of risk-weighted assets, linking capital directly to credit, market, and operational risk.
2. Foreign Ownership and Market Access
- Kenya: The market is fully liberalized following the lifting of the moratorium on new licenses on July 1, 2025. Foreign investors can fully own subsidiaries, enabling regional and global expansion.
- Uganda: Broad foreign participation is allowed, including Islamic banking windows and bancassurance operations, promoting financial model diversity.
- Ethiopia: Controlled liberalization under Proclamation No. 1360/2025 permits foreign entities to hold up to 49% in local banks, with strategic investors capped at 40% and foreign individuals at 7%. This opens Ethiopia to international capital while retaining local control.
3. Specialized Regulatory Focus
- Kenya: Focus is on systemic risk and digital finance, with Digital Credit Providers (DCPs) requiring formal licensing. By late 2025, 195 DCPs were licensed, and structured data governance rules were central to oversight.
- Uganda: Emphasis is on financial inclusion, agent banking, mobile money interoperability, and domestic data hosting. Risk-based supervision now incorporates environmental, social, and governance (ESG) considerations and board-level accountability.
- Ethiopia: Banks in Special Economic Zones (SEZs) must maintain capital buffers 2% above the national minimum. Directive SBB/95/2025 mandates quarterly reporting on qualitative risk exposures and sets a transition toward Basel II/III standards.
4. Operational Constraints
- Kenya: Oversight of Non-Deposit Taking Credit Providers (NDTCPs) has increased to curb predatory lending and protect consumer data.
- Uganda: Tier II banks face activity restrictions, limiting their ability to offer certain services or access payment systems.
- Ethiopia: SEZ-focused regulations require higher capital adequacy and liquidity, adding operational costs for banks in these zones.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.