Quote from Lawyer on July 1, 2025, 10:01 am

The Central Bank of Kenya (CBK) has officially revoked the operating license of Bank Al-Habib Limited (BAHL), a Pakistan-based commercial bank, effectively ending its presence in Kenya as of May 15, 2025. The decision follows BAHL's voluntary exit from the Kenyan market, prompted by a strategic global restructuring initiative aimed at streamlining its international operations.

Bank Al-Habib, headquartered in Karachi, Pakistan, was granted authorization by the CBK on April 9, 2018, to establish a representative office in Nairobi. This office marked BAHL's first venture into the African continent, specifically targeting Kenya as a gateway to explore business opportunities in East and Central Africa. Unlike fully licensed commercial banks, representative offices in Kenya, as regulated under Section 43 of the Banking Act, are restricted to marketing and liaison activities. They are not permitted to engage in core banking services such as accepting deposits or offering loans.

The Nairobi office served as a liaison hub, facilitating corporate and correspondent relationships, engaging with regulatory stakeholders, and promoting BAHL's retail, corporate banking, and international trade finance services offered by its parent bank and international affiliates. Despite its limited scope, the office was a strategic foothold for BAHL in East Africa, complementing its global presence in countries such as Bahrain, China, Turkey, the United Arab Emirates, and the Seychelles.

The closure of BAHL's Nairobi office is part of a broader strategic review conducted by the bank's Board of Directors. The decision reflects a global restructuring effort focused on consolidating international operations, enhancing operational efficiency, and reallocating resources to higher-growth markets. The CBK, in a statement issued on June 30, 2025, confirmed that BAHL's exit was voluntary and not linked to any regulatory breaches or financial misconduct. The bank had notified its customers, stakeholders, and the public of the closure on May 5, 2025, following CBK's approval on April 30, 2025.

The Kenyan financial sector has seen increasing competition, regulatory requirements, and digital disruption, which have prompted several international banks to reassess their presence in emerging markets. Industry analysts suggest that the high operational costs and competitive landscape in Kenya may have influenced BAHL's decision to exit, aligning with a global trend of foreign banks downsizing or withdrawing from markets where profitability is challenging.

The CBK's cancellation of BAHL's license was executed in accordance with Section 43 of the Banking Act, which governs the operations of representative offices of foreign banks in Kenya. The regulator emphasized that the process adhered to legal and regulatory requirements, ensuring a smooth exit that would not disrupt the broader financial sector. The closure was described as a procedural formality following BAHL's decision to cease operations.

In a related development, the CBK announced the lifting of a moratorium on licensing new banks, effective July 1, 2025. The moratorium, in place since November 17, 2015, was initially implemented to strengthen the Kenyan banking sector. The decision to lift the ban signals CBK's confidence in the sector's stability and its readiness to welcome new players, potentially offsetting the impact of BAHL's exit.

BAHL's departure reduces the number of foreign bank representative offices in Kenya, with its Nairobi outpost being its only presence in East Africa. However, the bank may continue to engage with the Kenyan market indirectly through correspondent banking relationships and partnerships in trade finance and corporate banking. The exit is not expected to significantly impact Kenya's financial sector, given the limited scope of BAHL's operations as a representative office.

Kenya remains an attractive market for international banks due to its position as a financial hub in East Africa. However, challenges such as high competition, digital transformation, and local licensing costs have led some global lenders to consolidate or exit. Recent years have seen consolidation in the sector, with banks like SBM Kenya and I&M Bank acquiring smaller players to strengthen their market positions.

Bank Al-Habib is one of Pakistan's leading private commercial banks, operating over 1,000 branches domestically and maintaining an international presence in key financial hubs. The closure of its Nairobi office does not affect its operations in other regions, where it continues to provide retail, corporate, and trade finance services. The bank's strategic shift underscores the challenges faced by Pakistani financial institutions in expanding into competitive foreign markets, particularly in regions with distinct regulatory and economic dynamics.

BAHL has urged stakeholders with inquiries about the closure to contact Oraro & Company Advocates via telephone at (+254) 709 250 000 or email at legal@oraro.co.ke. The bank expressed gratitude to its customers, partners, and the Kenyan public for their support during its seven-year presence in the country.

As Kenya's financial sector evolves, the CBK's decision to open licensing for new banks could attract fresh investment and innovation. The regulator's focus on compliance, as evidenced by recent measures to enforce lower lending rates and penalize non-compliant banks, underscores its commitment to a stable and consumer-friendly banking environment. While BAHL's exit marks the end of its direct presence in Kenya, the country's position as a regional financial hub continues to draw interest from global and local players alike.