NAIROBI, Kenya – The Central Bank of Kenya (CBK) is moving to regulate the rapid adoption of Artificial Intelligence (AI) within the nation's financial sector, emphasizing the need for a responsible and ethical approach to innovation. The announcement comes as new data reveals that 50% of Kenyan financial institutions have already integrated AI tools into their operations, prompting the regulator to develop a formal framework to manage the technology's immense promise and potential perils.

Speaking at the CBK Artificial Intelligence Hackathon in Nairobi on Thursday, November 20, 2025, the Director of Bank Supervision, Matu Mugo, articulated the bank's position. “CBK's philosophy is clear: we want to maximise the benefits of technology while minimising the risks,” Mugo stated. “We support innovation that broadens opportunity and inclusion while protecting stability, consumers, and trust in the financial system.” To that end, Mugo confirmed the CBK is in the final stages of preparing a “Guidance Note on Artificial Intelligence,” a move prompted by overwhelming demand from the industry, with 93% of surveyed institutions requesting formal guidance from the regulator.

The State of AI Adoption: A Sector at a Tipping Point

The push for regulation is a direct response to the technology's swift proliferation. A recent CBK survey conducted in March 2025 across banks, microfinance institutions, and digital credit providers painted a picture of a sector eagerly adopting AI. The primary applications are in critical functions such as improving credit scoring, enhancing fraud detection, and boosting customer service through chatbots and machine learning platforms. Leading institutions like Absa Bank Kenya, Equity Bank, and KCB Bank have already deployed AI-powered virtual assistants to engage with customers.

However, the same survey revealed a significant maturity gap. While adoption is at 50%, a staggering 67% of these institutions are considered “AI-immature,” meaning they are still in the early stages of awareness or are running limited pilot projects with minimal investment. This is further complicated by the fact that 44% of the institutions using AI admit they cannot adequately explain how their models arrive at decisions, a transparency issue known as the “black box” problem. This gap between ambition and readiness is stark; a separate survey by Akili AI found that while over 80% of senior banking leaders believe generative AI will be transformative, only 20% feel their institutions are fully prepared for the transition.

A Double-Edged Sword: Opportunities vs. Risks

The stakes for Kenya are high. AI presents a significant opportunity to deepen financial inclusion and drive economic growth. According to a report by McKinsey, AI could contribute an additional 2.6% to Kenya's annual GDP by 2030, largely driven by the financial sector. Fintech companies like Tala and Branch already use AI to analyze non-traditional data to assess the creditworthiness of individuals previously excluded from the formal banking system. For established banks, AI promises to dramatically lower operational costs, with research suggesting the cost of customer acquisition for a fully digital bank can be less than a third of a traditional one.

Yet, the CBK remains acutely aware of the risks. In its 2024 Annual Report, the bank cautioned institutions against a rushed adoption of AI without addressing the inherent ethical, legal, and operational dangers. The CBK's survey highlighted the industry's top concerns: 59% of respondents identified data quality and governance as the greatest risk, 54% pointed to cybersecurity vulnerabilities, and 52% cited a shortage of skilled AI professionals. A primary concern for the regulator is algorithmic bias, where AI models trained on historical data could perpetuate and even amplify discriminatory practices in loan decisions, potentially locking out deserving customer groups. Furthermore, the vast amounts of personal data required to train these systems must be handled in strict compliance with Kenya's Data Protection Act to prevent misuse and protect consumers.

The Regulatory Horizon: A National Vision for AI

The CBK's forthcoming guidance aligns with a broader national vision. On March 27, 2025, Kenya launched its National Artificial Intelligence Strategy (2025-2030), a landmark policy aimed at positioning the country as a continental leader in responsible AI development and governance. The strategy provides a framework for addressing regulatory gaps and fostering innovation in key sectors, including finance.

The regulator's approach is informed by its recent experience in bringing the burgeoning digital lending sector under its oversight through the Digital Credit Providers Regulations of 2022. This framework sought to protect consumers from predatory practices and ensure transparency, setting a precedent for regulating technology-driven financial services. The upcoming AI Guidance Note will serve a similar purpose, providing the financial sector with clear expectations on governance, risk management frameworks, data integrity, and the necessity of human oversight in automated decision-making. As Mugo concluded in his address, the goal is to create an ecosystem of clarity, trust, and accountability. “Today marks a step toward ensuring AI becomes a genuine force for good in Kenya and across Africa,” he said.