How Blockchain Could Change Kenya’s Banking Systems

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M-Pesa moves nearly 60% of Kenya’s GDP every year and serves more than 50 million users, yet gaps in the financial system remain wide. Remittance fees average 6.5% for a $200 transfer, about 17 million adults are still unbanked, fraud losses exceed KES 10 billion annually, and interbank settlements often face delays.

These are the pressure points pushing banks and fintech firms to explore blockchain in the banking sector as a way to make financial services faster, more secure, and more accessible.

In October 2025, Kenya enacted the Central Bank of Kenya’s and Capital Markets Authority’s Virtual Asset Service Providers (VASP) Bill, creating a regulatory framework for blockchain and virtual asset service providers. This shifted crypto skepticism into structured innovation, giving banks and fintech companies a legal foundation to integrate blockchain into their core operations. The framework is designed to license and supervise providers, enabling blockchain in the Kenyan banking sector to grow under clear oversight.

Expanding Access to Finance

A key opportunity for blockchain is financial inclusion. Through verifiable digital identities stored on distributed ledgers, unbanked Kenyans can access financial services without needing to visit physical branches. Banks using blockchain technology in Kenya are testing new lending models. This allows people without formal credit histories or collateral to qualify for microloans.

Projections indicate that this model could bring up to 10 million additional people into the formal financial system by 2030, particularly in agriculture and informal trade, which employ about 40% of Kenya’s workforce.

Cheaper and Faster Remittances

Kenya receives around $4.2 billion in remittances each year, mainly from the US and UK. Traditional transfer systems are slow and expensive, but blockchain-based networks such as Stellar Development Foundation’s Stellar and Ripple Labs offer near-instant, low-cost international transactions. These systems can cut remittance costs by up to 70% compared to traditional SWIFT transfers.

Several Kenyan banks are exploring stablecoin integrations, including Kenya Commercial Bank (KCB), to allow diaspora funds to flow directly into M-Pesa wallets. According to a 2025 CBK survey, 31% of banks are ready to pilot these systems, potentially channeling billions more shillings into the economy annually.

Efficiency in Lending and Settlements

Lending and settlement systems stand to benefit significantly from blockchain. Smart contracts, which are self-executing agreements stored on the blockchain, can automate loan disbursements, repayments, and compliance checks. This can reduce processing times from weeks to just hours.

Kenya’s syndicated lending market, valued at approximately KES 350 billion and driven largely by infrastructure projects, could become more efficient as blockchain simplifies coordination between multiple lenders.

Insurance providers are also testing parametric insurance products, where blockchain oracles feed in data such as rainfall levels to trigger automatic payouts to farmers. This minimizes delays, disputes, and fraud in claims processing.

Transparency and Fraud Prevention

Blockchain’s immutability is one of its strongest advantages. Every transaction is recorded permanently and can’t be altered, creating a transparent and auditable trail. This can improve compliance with Know Your Customer (KYC) regulations and reduce fraud in the banking system. The tokenization of assets, such as land titles and bonds, is also gaining traction.

According to Kenya’s Ministry of Information, Communications and the Digital Economy, tokenization could unlock as much as KES 1 trillion in illiquid holdings, creating new investment opportunities and improving liquidity in the market.

Addressing Cybersecurity Risks

While blockchain offers new opportunities, it also faces practical challenges. Rural internet penetration remains low at 25%, which may limit access to blockchain-based services. Scalability is another hurdle, with networks like Ethereum still facing congestion and high transaction costs during peak usage.

Cybersecurity threats in Kenya have also grown rapidly. From July 2022 to June 2023, 855 million threat events were detected, and between April and June 2024 alone, that number rose to 1.1 billion.

Regulatory clarity around decentralized finance (DeFi) and staking is still evolving. CBK is expected to expand sandbox programs to allow banks and fintechs to test new blockchain use cases safely. Public awareness is another key factor, as many Kenyans still lack a clear understanding of how blockchain works, which could slow adoption.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.