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Bank History

The Central Bank of Kenya was established by an Act of Parliament of March 24, 1966 and opened its doors to the public on September 14, 1966. The Bank is now anchored in the Constitution under Article 231. The mandate of the Bank is to formulate and implement monetary policy that promotes price stability, fosters liquidity, solvency and stability of the banking sector, issue currency notes and coins, and provide banking services to the Government, commercial banks and other financial institutions.

Prior to establishment of Kenya’s central bank, the East African Currency Board (EACB) undertook the role of currency issuance in the entire East African region throughout the colonial period to independence. Prior to Kenya’s independence in 1963, the East African Currency Board (EACB) published a report advising the three countries of Kenya, Uganda and Tanganyika to establish an East African Central Bank to act as the banker to governments — the bank was to provide banking services for the commercial banks, to smoothen financial fluctuations, and to function as an instrument of official monetary policy.

At independence, the EACB started performing some central banking functions in the absence of one. They provided credit to the government and were authorised to lend to commercial banks for crop financing. However, the board’s functions could not match those of a central bank. The concept of a single central bank began being mooted though it did not succeed. This then led to the establishment of the three East African country central banks of Tanzania, Uganda and Kenya.

Kenya’s first President Mzee Jomo Kenyatta being presented with a set of new currency notes by CBK Governor Dr Leon Baranski on September 15, 1966.

Key Milestones

For the past 50 years, the Bank has made significant strides in fulfilling its mandate. Successive Boards have seen the Bank grow from a staff establishment of 60 in 1966 to over 1,300. In response to its expanding functions, the areas of operation have grown from its head office in Nairobi to three branches (Mombasa, Kisumu, Eldoret) and three currency centres (Nyeri, Nakuru, Meru). With the enabling environment for effective growth, the Bank has witnessed a number of milestones in the country including the following:

Key Milestones

1896    First bank ever established in Kenya – the National Bank of India

1905    Establishment of Mombasa Currency Board

1910    Standard Bank of South Africa established

1911    Standard Chartered Bank founded in Kenya

1916    Barclays Bank established in Kenya.

1919    Mombasa Currency Board replaced with a London based East African Currency Board

1921    Cessation of the Indian Rupee as a legal tender

1922    East African shilling replaces the Rupee exchanging at Sh2 a rupee

1951    General Bank of Netherlands, later known as ABN Amro, set up

1953    Bank of India and Bank of Baroda set up

1956    Habib Bank (overseas) Ltd set up

1957     Kisumu Currency Centre established under East African Currency Board (EACB)

1960    The headquarters of the EACB moved from London to Nairobi

1962    Commercial Bank of Africa, which was registered in Tanzania, opens a branch in Kenya.

1965    The first locally owned commercial bank, the Co-operative Bank of Kenya, registered  under the Co-operative Societies Act

1966     March – enactment of Central Bank of Kenya Act. September – Official Opening of the Central Bank of Kenya at Herufi House. Kenya’s first currency banknotes issued to the public – denominations 5,10,20,50 & 100.

1967    Kenya’s first currency coins issued to the public – denominations 5ct, 10ct, 25ct, 50ct and KSh.1.

1968    The Cooperative Bank opens its doors for business. The National Bank of Kenya, the second locally owned bank, established

1971    Following agreement with the government, National and Grindlays banks’ commercial banking operations come under the control of the newly created Kenya Commercial Bank (KCB)

1972    CBK Head Office (current location) officially opened by Kenya’s first President Mzee Jomo Kenyatta

1973    The Industrial Development Bank (IDB) set up to provide long-term equity and capital to large-scale and medium industrial enterprises.

1977     Mombasa Currency Centre operations taken over by newly established CBK Mombasa Branch

1978    Official opening of CBK Mombasa Branch by Kenya’s first President the late Mzee Jomo Kenyatta

1981    CBK takes over operations of Kisumu Currency Centre from KCB

1983    Introduction of a crawling peg to replace the fixed exchange rate system of 1966 – 1982

1985    Banking Act (Chapter 488) amended to introduce an explicit deposit insurance scheme in Kenya – the Deposit Protection Fund Board (DPFB)

1986    New KSh.200 banknote introduced by CBK making it the highest denomination in circulation

1988    New KSh.500 banknote introduced by CBK making it the highest denomination in circulation

1989    Introduction of the first two automated teller machines (ATMs) by Standard Chartered Bank Kenya Ltd at its Moi Avenue branch

1991    Elimination of interest rates controls. CBK Eldoret Branch begins operations

1992    Kisumu Currency Centre upgraded to be CBK Kisumu Branch and starts operations in current building

1993    Introduction of a floating exchange rate regime

1995     Introduction of foreign exchange (forex) bureaus. New KSh.1,000 banknote introduced by CBK making it the highest denomination in circulation

1996    Non-bank financial institutions (NBFIs) required to convert to banks.

1997    CBK in partnership with Ministry of Finance establishes the Kenya School of Monetary Studies (KSMS)

1998    Full automation of the Nairobi Clearing House using the Magnetic Ink Character Recognition (MICR) technology to facilitate clearing of cheques

2002    Going live of Kenswitch – a shared financial switch consortium of more than 20 commercial banks in Kenya. Electronic Funds Transfer (EFT) payments introduced to the Automated Clearing House

2005    Risk Management Guidelines outlining the minimum coverage and elements of a comprehensive risk management programme issued. Introduction of the Kenya Electronic Payments and Settlements System (KEPSS) to help phase out the paper-based interbank settlement system

2006    Minister for Finance cedes operational supervisory powers of licensing, revocation of licenses, opening and closing of places of business and statutory management to the CBK. Enactment of the Microfinance Act, putting in place the necessary laws and regulatory framework for the establishment, licensing and supervision of microfinance banks

2007    Introduction of mobile money system in Kenya

2008    The Banking (Credit Reference Bureau) Regulations issued

2009    Enhancement of the minimum core capital requirements for commercial banks from Kshs 250 million in 2009 to Kshs 1 billion by end of 2012. Introduction of Agency banking through an amendment of the Banking Act. The Proceeds of Crime and Anti-Money Laundering Act was passed by Parliament. Introduction of cheque value capping to stop the processing of payments, cheques and Electronic Funds Transfers (EFTs),  of Ksh.1 million and above through the Nairobi Automated Clearing House. Nyeri Currency Centre opened for operations

2010    Introduction of Credit Information Sharing mechanisms. Integration of mobile money with banks. Nakuru Currency Centre opened for operations

2011    Cheque truncation system is introduced to support the exchange of electronic cheque images without the conventional exchange of physical cheques. Meru Currency Centre opened for operations

2012    The Kenya Deposit Insurance (KDI) Act enacted in response to the need to expand the mandate of the Deposit Protection Fund Board (DPFB) as the banking sector’s resolution authority. Reduction of the cheque clearing period from T+3 to T+2 days

2013    CBK granted power to supervise institutions and their associates on a consolidated basis and in liaison with other competent authorities. Shortening of the cheque clearing period to T+1 days. Introduction of the East African Payments system (EAPS) to facilitate real-time settlement of financial transactions by the public through commercial banks in the region using the five East African currencies.

2014    Kenya joins the COMESA Regional Electronic Payment and Settlement System (REPSS). The REPSS eliminated the need for each commercial bank to use off-shore correspondent banks for inter-country settlements

2016    Legislation of the Banking (Amendment) Act that introduces a cap on lending rates of not more than four per cent above the Central Bank Rate and deposit rates at 70% of the CBR. CBK in collaboration with the National Museum of Kenya opens a Numismatic Gallery

H.E. Mzee Jomo Kenyatta officially opens the CBK Head Office in 1972

H.E. Mzee Jomo at the official opening of Mombasa Branch


Development of Banking in Kenya

The financial journey in Kenya dates back to the pre-colonial periods. At first, the pioneering banks concentrated on financing international trade along the Europe-South Africa–India axis. They, however, soon diversified operations to tap the opportunities for profitable banking created by a growing farming settler community and pioneer traders in the local economy to whom they provided deposit and credit facilities. It was only a matter of time for banking to spread into the interior.

It all started with Indian money lenders operating quasi bank services probably as early as the 18th century but the first recognisable bank was Jetha Lila Bankers from India, which was established in Zanzibar in 1880. In 1889 the National Bank of India appointed the trade house of Smith Mackenzie to be their agent in Zanzibar. Smith Mackenzie had a Mombasa branch in 1887 which was taken over by the Imperial British East Africa (IBEA) in 1888.  The National Bank of India established its own office in Zanzibar in 1892. In July 1896 the National Bank of India established a branch in Mombasa renting premises from Sheriff Jaffer. The spread continued to 1904 when they opened a branch in Nairobi.

National Bank of India, Nairobi on August, 1904.

In April, 1909, the East Africa Post Office Savings Bank Ordinance was passed and in April of the following year, the Ordinance for the Regulation of Banks Established or to be Established in the East Africa Protectorate was passed.  The former Ordinance established the first bank in the formal sense while the latter enabled the National Bank of India to become the first commercial bank. By 1911 there were only three banks:-

  • The National Bank of India with branches in Mombasa, Nairobi, Nakuru and Kisumu.
  • The Standard Bank of South Africa having come in December, 1910 – operating in four locations: Mombasa (3 branches), Nairobi (2 branches), Nakuru and Kisumu.
  • Kathiawad and Ahmedabad Banking Corporation had a shortlived presence in Mombasa from 1910 to 1915.

The Standard Bank of South Africa Limited, Eldoret, 1912

The expansion of the banking networks grew from one branch in the town of Mombasa in 1896 to eight branches in five towns before the First World War having added Nairobi, Nakuru, Kisumu and Eldoret. The National Bank of South Africa, which was to become Barclays Bank DCO in 1926, arrived in Mombasa in 1916. During the Great Depression from 1929 to 1939, there was a gold rush to Kakamega and in 1934 there were two bank branches opened in the town to service the prospectors. These branches did not survive and were closed during the Second World War. By 1948, banks were to be found in 10 towns having expanded to Nyeri, Nanyuki, Kitale, Kericho and Thompson’s Falls (Nyahururu) with 18 branches as Mombasa, Nairobi, Nakuru and Kisumu all got representation from the three banks.

As time progressed, the changing landscape of banking began to note the entrance of fully indigenous banks. Kenya’s first fully locally owned commercial bank was the Co-operative Bank of Kenya, which was initially a co-operative society. It served the needs of growing farming communities and started operations in 1968. In the same year, the National Bank of Kenya became the first fully-owned government bank. In 1971, the Kenya Commercial Bank was formed following the merger of the National and Grindlays Bank, with the government owning a 60-per cent majority stake. It took poll position as the largest of the country’s commercial banks in terms of deposits and number of branches.

After independence, the banking sector in Kenya has continued to grow, reflecting the country’s growth towards economic prosperity.

Key New CBK Indicative Exchange Rates
US DOLLAR 129.2570
STG POUND 166.8837
EURO 140.5024
Posted On: 12-07-2024
Key Rates
Central Bank Rate 13.00% 05/06/2024
Inter-Bank Rate 13.09% 11/07/2024
CBK Discount Window 16.00% 05/06/2024
91-Day T-Bill 15.995% 15/07/2024
REPO 0.00% 08/05/2024
Inflation Rate 4.64% June,2024
Lending Rate 16.45% April,2024
Savings Rate 4.14% April,2024
Deposit Rate 10.77% April,2024
KBRR 8.9% 27/06/2016