Top banks face higher licence fees as State shifts from flat rates to revenue-based model

Top banks face higher licence fees as State shifts from flat rates to revenue-based model
Top banks face higher licence fees as State shifts from flat rates to revenue-based model - The Central Bank of Kenya headquarters in Nairobi. (Photo: CBK)
The Central Bank of Kenya headquarters in Nairobi. (Photo: CBK)

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Under the previous system introduced in 1994, banks paid a fixed licence fee of up to Sh400,000, alongside additional charges depending on the location of their branches.

Kenya’s banking sector is entering a new era of licence fee payments after the government replaced the 32-year-old fixed-rate model with a revenue-based system.
The move is expected to have varying cost implications depending on the size and earnings of individual institutions.
Introduced through Legal Notice No.81 of 2026, the new framework requires banks and other licensed institutions to pay annual licence fees based on their gross annual revenue.

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Under the previous system introduced in 1994, banks paid a fixed licence fee of up to Sh400,000, alongside additional charges depending on the location of their branches.
The new approach abandons the branch-based model and instead links regulatory fees to the size of an institution’s earnings.
The new annual fee rate will be implemented gradually, starting at 0.13 per cent of gross annual revenue in 2026, increasing to 0.14 per cent in 2027, and settling at 0.15 per cent from 2028 onwards.

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Gross annual revenue under the regulations includes income earned from interest on loans, advances, government securities and placements, as well as fees and commissions on loans, dividend income, foreign exchange trading income and other income reported in audited financial statements.
The regulations also introduce penalties for institutions that fail to pay the required fees on time.
‘An institution which fails to pay the annual fees specified in regulation by the date the annual fees fall due shall be liable to pay double the annual fees within ninety days after the date the payment of the annual fees falls due,” reads the legal notice.
The regulations further state that a lender that does not settle the fees within the additional 90-day period risks losing its banking licence through the revocation process provided under the Banking Act.
The compliance timeline for the new fee structure begins in the 2026 financial year, with institutions required to make payments by December 31, 2026, at a rate of 0.13 per cent of gross annual revenue.
For 2027, institutions will be required to remit the annual licence fees by December 31, 2027. 
From 2028 onwards, payments will continue to be made by December 31 of each year under the new framework.
The Central Bank of Kenya (CBK) will collect the fees as a lump sum payment, with newly licensed institutions required to base their initial fees on projected average gross annual revenue for the first three years of operation.

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