The first bank in Kenya was established in 1896 following the British occupation of the country and the construction of the Kenya-Uganda railway. Significantly, this was the National Bank of India, which subsequently became the National and Grindlays Bank. It was followed by the Standard Bank of South Africa in 1910 and the National Bank of South Africa in 1916. In 1926, the National Bank of South Africa merged with the Anglo-Egyptian Bank to form Barclays Bank (Dominion, Colonial and Overseas) the predecessor to one of the largest banks in Kenya.

For the next 50 years until the early 1950s, there were no significant changes in the banking sector until several continental and foreign banks started entering the Kenyan banking sector: Nedelandsche Handel-Maatshappij, predecessor to the present day ABN-AMRO Bank, entered in 1951 followed in 1953 by Bank of India and Bank of Baroda (both from India), while a Pakistan bank, Habib Bank, established a branch in 1956. Ottoman Bank from Turkey registered in 1958, and the Commercial Bank of Africa started in 1962 through Tanzania.

Most of these early banks are still operating in Kenya today. Soon after independence in 1963, two Kenyan banks were quickly set up: the Co-operative Bank of Kenya (1965) to look after the interests of the co-operative movement and the National Bank of Kenya (1968) to look after other national interests, since all the other banks were either foreign-owned or foreign controlled. In 1969, the business of Ottoman Bank was taken over by the National and Grindlays Bank and in 1971, the National and Grindlays Bank itself was split into two separate banks in which the Kenya Government had substantial ownership:

• The Kenya Commercial Bank and
• Grindlays Bank (now the Stanbic Bank after the acquisition of the governments' shares by the South African multinational bank).

Until this time, banking was the preserve of foreigners with the minor exception of the three "government" banks named above. The ordinary Kenyan did not have what might be viewed as a genuinely national banking institution. From around 1977, Kenyan nationals started venturing into banking through non-bank financial institutions (NBFIs), i.e., finance houses and building societies. Initially, there was skepticism about the ability of these institutions to survive in the intensely foreign environment.

The skepticism was well-founded since indigenous nationals lacked capital, the entrepreneurial capacity required for banking, and managerial skills to run independent banking institutions. Entry into this area was made deliberately easy as a matter of policy by government in order to encourage the deepening of the financial system in the country.

Presently, the Central Bank of Kenya is the statutory authority for regulating the conduct of banks in the country. It does not have power to license banks, this being the responsibility of the Directorate of Fiscal and Monetary Affairs following approval by the Minister for Finance.

With the recent amendments to the Banking Act, the Central Bank is now required to "vet" individuals applying for a banking license. According to Central Bank's economic review report, there were as at December 2000, 50 commercial banks and 13 NBFls. This number compares with 14 banks and 17 NBFls in 1981.

Banking hours in Kenya are from 9 am to 3 pm from Monday to Friday and 9 am to 11 am on Saturdays. Although some banks now are open for longer, for instance, Barclays prestige account holders have longer banking hours than ordinary account holders. Banks in Mombasa open 30 minutes earlier.