The Capital Markets Authority (CMA) proposed new licensing regulations that could significantly alter the regulatory cost structure for fund managers in Kenya. Under the proposal, the current flat annual licensing fee of Kshs 150,000 would be replaced with a variable fee equivalent to 0.05% of Assets Under Management (AUM), subject to a minimum fee of Kshs 100,000 and a cap of Kshs 15.0 mn.
Kenya’s capital markets regulatory framework is undergoing a major overhaul following the introduction of the Capital Markets Regulations, 2025. The new regulations introduce wide-ranging reforms affecting licensing conditions, capital requirements, and regulatory obligations for market intermediaries operating under the oversight of the CMA. Among the key reforms is the revision of capital requirements across several license categories, with higher minimum capital thresholds aimed at strengthening the financial resilience of licensed intermediaries. The framework also introduces new license categories that reflect evolving market structures and technological developments. These include licenses for intermediary service platform providers and robo-advisory firms, recognizing the growing role of digital platforms in distributing investment products and offering automated investment advice.
The regulations further expand regulatory oversight by introducing additional compliance obligations and governance expectations for licensed entities. They also modernize elements of the licensing framework that had remained largely unchanged since 2002. In addition, the introduction of in-principle approvals will allow applicants who meet most licensing requirements to receive temporary approval for up to six months while they finalize operational systems before receiving full licensing. The regulations also expand the activities permitted for investment banks by allowing them to operate as market makers, a move expected to improve market liquidity and price discovery within Kenya’s capital markets. These reforms come at a time when Kenya’s collective investment schemes (CIS) sector is experiencing rapid growth. Assets under management increased by 114.8% year-on-year to Kshs 679.6 bn in Q3’2025, from Kshs 316.4 bn in Q3’2024. Over a longer horizon, unit trust funds have grown significantly, recording a 5-year CAGR of 23.1% to reach Kshs 155.6 bn in Q3’2022 from Kshs 52.4 bn in Q3’2017.
Investor participation has also surged, with the number of CIS investors rising by 127.7% to 3.0 mn in Q3’2025 from 1.3 mn in Q3’2024. This growth has largely been driven by the increasing popularity of money market funds, which offer accessible and relatively liquid investment options for retail investors. The proposed asset-based licensing model could significantly increase regulatory costs for large fund managers, potentially compressing profit margins or leading to higher fees for investors. While the approach may strengthen regulatory oversight, policymakers will need to balance increased regulatory funding with the need to support the continued growth of Kenya’s collective investment schemes and broader capital markets.
