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Banks in Kenya and Tax Compliance Risk

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  • Post category:Blog on Tax
  • Post last modified:April 4, 2025
  • Reading time:17 mins read
There are many banks in Kenya. Each of those banks poses a certain level of risk to taxpayer’s especially compliance risk. It does not matter the level of risk but the fact is that there is risk. Unfortunately, many taxpayers are not aware that the fact they deposit money in a commercial bank and microfinance bank, or they have any kind of transactions, that presents potential tax compliance issues.

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For example, taxpayers have financial transactions through commercial banks and microfinance banks. In case the financial institutions experience any financial instability, the taxpayer’s tax compliance will be affected negatively. The taxpayers may even face business closure. This means that taxpayers should always be on the lookout for any exposure by the financial institutions. This will help them take measures to minimize their losses.

In the Kenyan banking landscape, there are commercial banks, and microfinance institutions. Though they all offer financial services, the two types of organisations are different in certain ways, and they present varied associated risks to taxpayers.

Commercial Banks and Microfinance Banks

Here are more than thirty eight commercial banks in Kenya as at the time of writing this article. Commercial banks are the traditional financial institutions that offer a wide range of services to individuals, businesses, and corporations. Some of the services they offer include:

  1. Deposit accounts (savings, current, etc.)
  2. Loans (personal, mortgages, business, etc.)
  3. Debit and credit cards, etc.
  4. Investment services (fixed deposits, etc. )
  5. International banking services

The financial institutions handle large volumes of transactions and cater to diverse customer segments. However, they do not operate free from any monitoring. They are subjected to strict regulations by the Central Bank of Kenya (CBK).

Microfinance Banks

Currently, there are more than fourteen Microfinance Banks (MFBs). These institutions focus on providing financial services to underserved low-income individuals and small businesses that are often excluded from the traditional banking system. Some of the services they offer include

  1. Small loans (microloans)
  2. Savings accounts
  3. Basic insurance products
  4. Financial literacy training

The two main goals of MFBs are to promote financial inclusion and economic development in underserved communities. MFBs have a specialised customer base and typically deal with smaller transaction volumes. They are also regulated by CBK, but their regulations requirements are usually lighter than that of commercial banks. This is because of their client base and smaller holding or transacttions.

Key Differences

There are many differences between commercial banks and microfinance institutions. The following are some of those differences.

  1. Target market – Commercial banks serve a broad clientele, while MFBs focus on low-income individuals and small businesses.
  2. Loan size – Commercial banks offer larger loans, while MFBs provide microloans.
  3. Service range – Commercial banks offer a wider range of services, whereas MFBs concentrate on basic financial services.
  4. Regulation – Commercial banks are subject to stricter regulations due to their size and scope.
  5. Impact – Commercial banks primarily aim for profit, while MFBs balance profitability with social impact.
  6. Capital requirements – Commercial banks are subject to much higher capital requirements than microfinance banks.

Tax Risks Banks and Microfinance Pose to Taxpayers

Almost all commercial bank and microfinance customers are taxpayers. Therefore, any risk that may be experienced by any of the banks and microfinance institution is likely to affect the customers. Bank and microfinance institution do not have their own money. They operate with customers deposits.

Hence, both commercial banks and microfinance institutions present potential risks to taxpayers. The taxpayers will be affected directly or indirectly. There are many risks that commercial bank and microfinance customers pose to taxpayers. The following are some of the risks:

a. Tax Avoidance and Evasion

Banks and MFBs, like any other business, can be involved in tax avoidance and tax evasion schemes, which deprive the government of revenue. Many have been caught on the wrong footing. This can involve activities like underreporting their annual income, inflating annual expenses, or using complex financial instruments to minimise their tax liabilities.

When banks and MFBs are caught engaging in tax avoidance and tax evasions during tax audits, they risk being closed down by the tax commissioner. If any bank or MFBs is closed down, it will go with customer’s deposits and loans. This may result in closure of some taxpayer’s businesses that will find it difficult to operate without access to their funds.

b. Money Laundering

The financial sector is vulnerable to money laundering activities, where illegal funds are disguised as legitimate transactions. This can undermine tax collection efforts by obscuring the true source of income. Any financial institution suspected of engaging in money laundering risks being closed down. The institution will also be under extra scrutiny for money laundering activities.

When an institution risk being closed down, taxpayers deposits are at risk and theirs businesses are also at risk. The extra secruting for money laundering activities is not limited to the financial institution alone, it is also extended to depositors accounts. Financial institutions engage in money laundering activities on behalf of customers.

c. Regulatory Arbitrage

Many commercial banks operate across countries. They might exploit differences in tax regulations across the various jurisdictions to minimise their tax burden. This can lead to revenue losses for the government. Besides, this will bring the banks under the secrutiny of the tax commissioner thus risking the banks reputation and taxpayers deposits.

d. Financial Instability

If banks or MFBs engage in risky financial practices, this will lead to financial instability which is risky for all taxpayers. The taxpayers deposits and tax payments are at risk. For example if there is a run on the financial institution, all customer deposits are lock and the taxpayer may seek other sources to pay tax.

Taxpayers operating capital may also be locked and his may result in the taxpayer closing down their operations. Financial instability in any bank or MFB risk taxpayers money. When commercial banks and MFBs face financial instability, they may sometimes require government bailouts. The bailouts are ultimately funded by taxpayers money.

e. Non-Performing Loans

When lending institutions have a high number of non-performing loans from customers, there is a risk of writting off the loans. These will result in financial losses. This action will affect how much tax the the financial institutions will pay to the government. Sometimes, the non-performing loans can also destabilise the financial institiution. This will risk taxpayers deposits. Non-performing loans will also be expensive to do business in the country.

It is important to note that regulatory bodies like the CBK and the Kenya Revenue Authority (KRA) have put in place measures to mitigate the risk of non-performing loans. For example, all financial institutions are audited for compliance by the CBK. Additionally, KRA closely monitors the financial institutions for tax compliance. Almost all of financial institutions are under large Taxpayers Office (LTO) and they are subjected to tax audits occasionary.

The five risks are some of the risks presented by commercial banks and microfinance institutions to their customers who in most cases are taxpayers. There is no single commercial bank or microfinance institution that is immune to risks. The difference is thee level of risk exposure, some have high risks while other have low risks. Which commercial banks and microfinance institutions operate in Kenya?

A List of the Banks and Microfinance Institutions in Kenya

The following is a comprehensive list of the commercial banks and microfinance institutions that are currently operating in Kenya. It is important to appreciate that this list may change at any time depending on various circumstances.

The list includes the institutions websites and the head office Headquater Locations. Note that the websites and Headquater Locations may change. It is best to verify directly with the commercial banks or microfinance institutions.

Commercial Banks in Kenya:

The following is a list of 38 commercial banks n Kenya. The list is aranged alphabetically.

1. Absa Bank Kenya PLC:

    • Website: ABSA Bank
    • Headquater Location: Nairobi, Kenya.

2. Access Bank (Kenya) PLC:

    • Website: Access Bank
    • Headquater Location: Nairobi, Kenya.

3. African Banking Corporation Ltd (ABC Bank):

    • Website: ABC Bank
    • Headquater Location: Nairobi, Kenya.

4. Bank of Africa Kenya Ltd:

5. Bank of Baroda (Kenya) Ltd:

6. Bank of India:

7. Citibank N.A. Kenya:

8. Commercial International Bank Kenya Ltd (CIB):

9. Consolidated Bank of Kenya Ltd:

10. Co-operative Bank of Kenya Ltd:

11. Credit Bank PLC:

    • Website: Credit Bank
    • Headquater Location: Nairobi, Kenya.

12. Development Bank of Kenya Ltd:

13. Development Bank of Kenya Ltd:

    • Website: devbank.com
    • Headquater Location: Nairobi, Kenya.

14. DIB Bank Kenya Ltd:

    • Website: DIB Bank
    • Headquater Location: Nairobi, Kenya.

15. Ecobank Kenya Ltd:

16. Equity Bank Kenya Limited:

    • Website: Equity Bank
    • Headquater Location: Nairobi, Kenya.

17. Family Bank Ltd:

    • Website: Family Bank
    • Headquater Location: Nairobi, Kenya.

18. Gulf African Bank Ltd:

19. Guardian Bank Ltd:

20. Habib Bank:

    • Website: Habib Bank
    • Headquater Location: Nairobi, Kenya.

21. I&M Bank Ltd:

    • Website: I&M Bank
    • Headquater Location: Nairobi, Kenya.

22. KCB Bank Kenya Limited:

    • Website: KCB Bank
    • Headquater Location: Nairobi, Kenya.

23. Kingdom Bank Ltd:

24. Middle East Bank (Kenya) Ltd:

25. M Oriental Bank Ltd:

26. M Oriental Bank Ltd:

    • Website: morientalbank.com
    • Headquater Location: Nairobi, Kenya.

27. National Bank of Kenya Ltd:

28. NCBA Bank Kenya PLC:

    • Website: NCBA Bank
    • Headquater Location: Nairobi, Kenya.

29. Paramount Bank Ltd:

30. Premier Bank Kenya Ltd:

31. Prime Bank Ltd:

    • Website: Prime Bank
    • Headquater Location: Nairobi, Kenya.

32. SBM Bank Kenya Ltd:

    • Website: SBM Bank
    • Headquater Location: Nairobi, Kenya.

33. Sidian Bank Ltd:

34. Spire Bank Ltd:

    • Website: spirebank.co.ke
    • Headquater Location: Nairobi, Kenya.

35. Stanbic Bank Kenya Ltd:

36. United Bank for Africa Kenya Ltd:

    • Website: United Bank
    • Headquater Location: Nairobi, Kenya.

37. Standard Chartered Bank Kenya Ltd:

38. Victoria Commercial Bank PLC:

Please note that this list may not be exhaustive. The list may change depending on several circumstances.

Microfinance Banks

There are many microfinance banks in Kenya. The following is a list of fourteen institutions that are offering financial services. Note that this list is not exhaustive. There may be changes later.

1. Caritas Microfinance Bank Ltd.:

2. Branch Microfinance Bank Ltd.:

    • Website: branch.co
    • Headquater Location: Nairobi, Kenya.

3. Choice Microfinance Bank Ltd.:

    • Website: choicemfb.com
    • Headquater Location: Nairobi, Kenya.

4. Daraja Microfinance Bank Ltd.:

    • Website: darajamicrofinance.co.ke
    • Headquater Location: Nairobi, Kenya.

5. Faulu Microfinance Bank Ltd.:

    • Website: faulukenya.com
    • Headquater Location: Nairobi, Kenya.

6. Kenya Women Microfinance Bank PLC.:

    • Website: kwftbank.com
    • Headquater Location: Nairobi, Kenya.

7. Rafiki Microfinance Bank Ltd.:

    • Website: rafiki.co.ke
    • Headquater Location: Nairobi, Kenya.

8. Lolo Kenya Microfinance Bank PLC.:

    • Website: lolokenya.co.ke
    • Headquater Location: Nairobi, Kenya.

9. Lolo Kenya Microfinance Bank PLC.:

    • Website: lolokenya.co.ke
    • Headquater Location: Nairobi, Kenya.

11. U & I Microfinance Bank Ltd:

    • Website: uandimfbank.co.ke
    • Headquater Location: Nairobi, Kenya.

12. Salaam Microfinance Bank Ltd:

    • Website: salaammfb.co.ke
    • Headquater Location: Nairobi, Kenya.

13. On It Microfinance Bank Ltd:

    • Website: onitmfi.co.ke
    • Headquater Location: Nairobi, Kenya.

14. Muungano Microfinance Bank PLC:

    • Website: muunganomfb.co.ke
    • Headquater Location: Nairobi, Kenya.

In this article we have explained the risk that taxpayers face from financial institutions. We have also explained the difference between commercial banks and microfinance banks. We have also give you a list of all the banks that are currently operating in the country. Incase you want to have a discussion about the risk that your financial institution poses to your tax compliance, feel free to get in touch with us.

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