How to Apply for a Banking Business license in Kenya

The following are the key steps to be followed in applying for licence to start a
commercial bank, non-bank financial institution or mortgage finance company How to Apply for a Banking Business license in Kenya:-

1. Contact the Central Bank of Kenya at an early stage for a preliminary meeting to
   discuss CBK licensing requirements and related issues.
2. Seek CBK’s approval for the use of the word “bank’’ or “finance” in the proposed
   name.
3. Once CBK has approved the name, apply to the Registrar of Companies for
   incorporation of the proposed bank, mortgage finance company or non-bank
   financial institution as a limited liability company.
4. Upon incorporation of the limited liability company, apply to CBK for a banking,
   mortgage finance company or non-bank finance institution licence. At this stage
   you should contact the Bank Supervision Department at CBK or download and
   complete the following application forms which can be accessed from the
   Central Bank website: www.centralbank.go.ke:
   i) “Application form for a License to Conduct the Business of an Institution”
   (Form CBK IF 1-1),
   ii) “Fit and Proper” forms for proposed directors and Chief Executive Officer
   (Form CBK IF 1-2),
   iii) “Fit and Proper” forms for all significant shareholders (Form CBK IF 1-3).
5. The duly completed application form, Form CBK IF 1-1, should be forwarded
   together with the support documentation below:
   i) Certified copy of the certificate of incorporation of the institution.
   ii) Certified copy of the Memorandum and Articles of Association of the
   proposed institution.
   iii) Certified copy of the Memorandum and Articles of Association of any
   corporate body that proposes to have a significant shareholding in the
   institution.
   iv) Certified copy of the latest audited financial statements for each of the three
   years immediately preceding the date of the application if the applicant has
   been operating in any sector under any name and laws or in cases where any
   of the shareholders is a corporate body.
   v) Where the proposed significant shareholders are natural persons, certified
   personal statements of affairs for the past three years should be submitted.
6. All applications should be submitted together with a non-refundable application
   fee), payable by banker’s cheque in favour of the Central Bank of Kenya or such
   other mode of payment as the CBK may prescribe, as specified under the Fourth
   Schedule to the Banking Act,(The Banking (Fees) Regulations. The application fee
   is currently Kshs 5,000.
7. In case of an institution incorporated outside Kenya, in addition to notarized
   copies of the documents specified in (5) above, the following should also be
   submitted:
   i) A notarized copy of the signed minutes of the board of the institution or other
   prime oversight body passing the resolution to establish a branch or
   subsidiary in Kenya,
   ii) An undertaking by the board or other oversight body to maintain minimum
   assigned capital in the proposed branch or subsidiary in Kenya as per the
   Banking Act and that such capital shall be in Kenya shillings,
   iii) The name and contact details of a designated person(s) from the Head Office
   authorized to liaise with the Central Bank on the application on behalf of the
   institution.
   iv) A letter of no objection from the home supervisory authority recommending
   the applicant to establish a branch or subsidiary in Kenya should be obtained.
   The letter should be forwarded directly to the Director, Bank Supervision
   Department, Central Bank of Kenya, P.O. Box 60000-00200, Nairobi.
   v) There shall be an understanding that the home country supervisor will
   exchange supervisory information with the Central Bank of Kenya.
   vi) Confirmation from the home country supervisor that the promoters of the
   foreign incorporated bank do not operate a shell bank should be obtained.
   vii) Where necessary, confirmation from the home supervisor that the supervisor
   conducts consolidated supervision.
8. Sworn declarations signed by every officer as specified in the application forms.
9. A feasibility study of the future operations and development of the intended
   business for a minimum period of three years from the date of the application
   including:
   i) A comprehensive diagrammatic representation of the group structure, if
   the applicant is part of a group of companies (either as a parent, associate,
   subsidiary or joint venture), indicating details of all respective individual
   and institutional shareholding within the group as well as the ultimate
   beneficial shareholders.
   ii) Proposed organization structure for the proposed institution showing:
    Proposed Board of Directors.
    Proposed CEO, Executive Directors and Senior Officers.
    Proposed functional divisions.
   iii) Up-to-date and detailed curriculum vitae of every significant beneficial
   shareholder, director and any senior officer who will take part in policy
   making, as well as certified copies of supporting documentation such as:
    Academic and professional certificates.
    Contact details (postal and e-mail addresses, phone contacts of at least
   three independent referees, one of whom should be a previous employer
   or business associate).
    Valid Personal Identification Number (PIN) and tax compliance
   certificate issued by the relevant tax authority in Kenya.
    The latest credit report from a licensed credit reference bureau.
    Certified statement of personal financial affairs.
    Two recent passport-size photographs.
   iv) Schedule of all the preliminary expenses including organization costs,
   share-selling and brokerage costs and commission.
   v) Projections of financial statements for the first three years of operations.
   vi) Interest rate sensitivity analysis of the projections submitted or other
   similar analysis of the extent to which the forecasts will change when
   interest rate vary (the assumptions underlying the projections and the
   sensitivity analysis should be stated).
   vii) The proposed operational arrangements of the applicant – Show details of
   the proposed functional divisions and units, activities to be run in-house
   and those to be outsourced. Rationale for outsourcing and the riskmitigation measures in place should be provided.
   viii) Statistical and other data which may have been collected in respect of the
   area in which the applicant intends to serve including population of the
   area, schemes of agriculture, business, industrial development and existing
   banking facilities.
10. Sources and evidence of availability of capital – Details of the sources of capital
    contributed by all proposed significant individual and institutional shareholders
    (i.e. those controlling, directly or indirectly, more than 5% of the applicant’s
    proposed issued equity) as well as capacity to meet the minimum capital
    requirements for the proposed institution as stipulated in the Banking Act should
    be demonstrated. Evidence to be submitted includes either copies of certified bank
    statements, Fixed Deposit Receipts (FDRs) or Government Securities. Currently a
    minimum capital of Kshs 1 billion is required to start a bank or a mortgage
    finance company.
11. Every proposed individual and institutional shareholder should submit, as part of
    the sworn declaration in the “Fit & Proper Form”, CBK IF 1-3, a statement to the
    effect that the proposed capital is not from proceeds of crime or illicit activities.
12. Upon meeting all the requirements, the Central Bank will grant the applicant an
    approval in principle to conduct the business of a bank, mortgage finance company
    or non-bank financial institution, as the case may be.
13. With this approval, the applicants may proceed to obtain premises, Information
    Technology Systems, put in place other necessary operating facilities and recruit
    staff for the institution.
14. Once the applicants are ready with their premises and systems, they should then
    invite the Central Bank to conduct an inspection.
15. If the inspection is satisfactory, and prior to issuance of the license, applicants are
    required to pay the prescribed annual license fees as specified under the Fourth
    Schedule of the Banking Act. The prescribed annual license fees are payable in full
    for the year during which the license is initially issued, and shall not be prorated
    for validity periods less than 12 months.
16. Once the requisite license fees have been paid, the Central Bank places a notice in
    the Kenya Gazette to formally specify the institution.
17. A license is then issued and the newly licensed institution can open its doors to the
    public.

Procedure – Apply for a Banking Business license in Kenya

Obtaining a Bank Business license include the following stepsStep I –

Book an appropriate name with the Registrar of Companies and write to the Central Bank to seek approval for the name. The name should incorporate the words Commercial Bank, ie “XYZ BANK”. or “XYZ COMMERCIAL BANK”.Step II

Register with the Ministry of Trade in Kenya.Step III –

Attend a First meeting with the organizers and keep with you a Signed minutes of the first meeting along with attendance sheet.Step IV –

Submit a prospectus which is a printed statement that describes and forecast the course or nature of the company along with expected risks distributed to the prospective investors.Step V –

Write an application requesting to open a blocked subscription account indicating the name of the Bank(s)Branch(es)Step VI –

A Duly completed application form as specified under the Bank proclamation of the Directives for organizing a Bank and project manager. Attach a Questionnaire test for organizing a bank and project Manager.Step VII –

Attach Evidences of payment of investigation.Step VIII –

A duly completed application form together with all enclosures as stated in the baking supervision Directives.Step IX –

Attach the evidence of paid up capital which includes certificate of deposits in a blocked account and evidence of valuation of contribution in Kind if any.Step X –

Attach a list of names nationality,address,number and value of subscribers shares of founder to be published in a local Newspaper in Kenya.Step XI –

After the name has been approved by the Central Bank, register the company and after making a formal application to the Director, Bank Supervision Department, Central Bank of Ethiopia in a duly completed FORM/CBK/FXD1 attaching the following documents:

• non-refundable application fee of Ksh.20,000 (bankers cheque payable to the Central Bank of Kenya);
• a certified copy of a statement of affairs of the applicant;
• a certified copy of the applicants memorandum and articles of association;
• a certified copy of the applicants certificate of incorporation;
• a feasibility study including financial projections for three years (balance sheet, profit and loss account and cash flow statements), organizational structure, physical location and postal address;
• bank statements of the bureaus shareholders and directors for a period of six months prior to the date of application;
• duly completed fit and proper forms for the shareholders, directors and principal officers of the bank;
• credit reports from a credit reference bureau for the shareholders, directors and the principal officers of the Bank;
• a declaration by the applicant that none of its directors and/or shareholders has ever been declared bankrupt, participated in the management of a collapsed institution, convicted by any court of competent jurisdiction in Kenya or elsewhere of a criminal offence involving fraud, money laundering, tax evasion, or any other act of dishonesty;
• a declaration by the applicant that none of its directors and/or shareholders holds a similar position or role in any other Commercial Banks;
• an undertaking by the applicant to comply with the provisions of the Central Bank of Ethiopia Act, the Regulations, the Commercial Banks Guidelines and any instructions/ directions issued by the Central Bank of Ethiopia regarding the establishment and operations of Commercial bank at all times; and
• A Business plan stating, financial analysis,banking sectoral analysis, business Environment,organization charts,strategic and operation plan,source of capital, accounting policies,technology competency, products and services.
• any other information as may be required by the Central Bank of Kenya.

Step XII –

• pay the licence fee of Ksh.60,000 to the Central Bank of Kenya by bankers cheque;
• transfer the non-interest bearing deposit of US$30,000 to the Central Bank of Kenya offshore account;
• invite the Central Bank of Kenya to inspect the Banks premises prior to commencement of business.

Step XIII –

Upon fulfillment of the above requirements or otherwise the Central Bank shall:

• issue a Banking licence to the applicant; or
• inform the applicant in writing that the application has been declined and advise the unsuccessful applicant that an appeal to the Central Bank for review of the decision to decline may be lodged within 30 days from the date thereof. Banking Business license in Kenya

Step XIV –

On receiving the license from the Central bank of Kenya, the applicant must obtain the certificate of commencement of Business from the registrar of companies,and submit a copy to the Central Bank of Kenya.

• Notify the Bank of Kenya of its Shareholders,directors and Staff of the Commercial bank including the following details:

• Names
• Residential Address
• Specimen signature
• Recent passport size photos endorsed by the Bank Directors Banking Business license in Kenya

Required Documents

• Completed application and other accompanying documents;
• Investigation fee paid during submission application;
• Publish a notice of intention to engage in banking business in widely circulating newspapers;
• A minimum of one-fourth of the subscribed shares shall be fully paid in cash;
• Minimum paid-up capital paid in cash and deposited in a blocked account in a bank in the name of the prospective bank; (recently the Central Bank has raised the minimum paid up capital to half a billion from 75 million.)
• Directors, the chief executive officer and senior executive officers of the bank shall meet the qualification criteria prescribed by the Central Bank;
• The premises, security arrangements and cash vault meeting National Bank standard.
• A duly completed application form.
• Proper book keeping Register
• Academic Qualification documents
• designation and specimen signature of the staff members
• Address of applicant
• evidence of provisional tax payment
• A tax clearance certificate.

Eligibility

• Commercial Banks may be established by any eligible corporate body or corporation duly licensed by the Central bank of Kenya to accept Deposit,lend money,issue money to clients, buy foreign currency and draft and sell foreign currency.
• Commercial banks applicant must be a Kenyan Nationality or foreign resident but residing in Kenya.
• All Individual or company registered for banking Business in Kenya with the registrar of Companies.

Fees

Application Fee: Ksh 5,000/=License Fee(a) Ksh 400,000/= granting of a license to an institution and each anniversary thereof:(b) Ksh150,000/= for branch within municipality(c) Branch within a town council ksh 100,000/=[d] Branch within an urban council Ksh 30,000/= Banking Business license in Kenya

Validity

One Year

Processing Time

Instructions

• The National Bank has broad powers in the affairs of banks. It can suspend or remove a CEO, director or other senior executives,
• It also can suspend voting right of an influential shareholder when he fails to fulfill the ethical requirements of the Central Bank. Banking Business license in Kenya

• No person shall carry out a Banking business unless he/she is in possession of a Banking Business License.
• A person who fails to contravenes or fail to comply with section 33D shall be guilt of any offence and shall be dealt with in accordance with Financial laws.

Required Information

• Full Name of Applicant
• Address of Applicant
• Location of Foreign Exchange Bureau
• License Number
• A tax clearance certificate.
• Evidence of provisional tax payment
• Full names, addresses and designations of the employees of the bureau.
• Proof of legal identification. Your national driver’s license or international passport are the best for this.
• Proof of legal address. House rent receipts, and utility bills stating your house address are acceptable.
• Bank statement. Not all Authorities require this except for further verification purpose or alternatives.
• Utility Bill Receipt. Some Authorities require this to further verify your legal identity and proof of social responsibility. Banking Business license in Kenya

One Month

Need for the Document

Banking is a rapidly growing industry in Kenya. Currently there are 3 state owned and 16 private commercial banks; Commercial Bank of Kenya is the largest, controlling the majority assets of the industry.

Despite strict government regulations through lending quota, bond buying, windfall tax and increased capital requirements, banks are reporting strong profit and paying high dividends.

The proper licensing and supervision of banks and the banking system in Kenya are under the Central Bank of Kenya of the Banking business Proclamation No.33D/2008. The Central Bank of Kenya was established in 1966 through an Act of Parliament – the Central Bank of Kenya Act of 1966 and began operation on 23rd May, 1966.

Following the proclamation the Central Bank of Kenya was entrusted with the following responsibilities.

• To regulate the supply, availability and cost of money and credit.
• To manage and administer the country’s international reserves.
• To license and supervise banks and hold commercial banks reserves and lend money to them.
• To supervise loans of commercial banks and regulate interest rates.
• To issue paper money and coins.
• To act as an agent of the Government.
• To fix and control the foreign exchange rates.