East Africa’s banking sector is bracing for tougher times as regulatory uncertainty, rising compliance costs, and digital disruption dominate the outlook, according to PwC’s 2026 Eastern Africa Banking Survey.
Executives warn that unpredictable rule changes are now the single biggest risk to growth.
Regulatory Uncertainty Tops Concerns
The survey, conducted among senior banking executives in Kenya, Uganda, Tanzania, Rwanda, and Mauritius, reveals that 68% of respondents are “concerned” or “extremely concerned” about regulatory unpredictability. Banks cite shifting capital requirements, new consumer protection rules, and evolving tax compliance frameworks as major hurdles.
“The pace of regulatory change is outstripping banks’ ability to adapt,” said one Kenyan CEO quoted in the report. “We support stronger oversight, but the lack of clarity and consistency is eroding confidence and slowing investment.”
Digital Transformation: Opportunity and Pressure
Despite the regulatory headwinds, digital transformation remains the sector’s most promising growth driver. More than half of surveyed banks are prioritizing investments in mobile banking, artificial intelligence, and cybersecurity.
PwC notes that customer expectations for seamless digital experiences are rising, pushing banks to accelerate innovation. A Tanzanian executive observed: “Fintechs are setting the pace. If traditional banks don’t match their agility, we risk losing relevance.”
Profitability Under Strain
The survey highlights margin compression as another pressing challenge. With interest rate caps, rising non-performing loans, and higher compliance costs, profitability is under pressure.
- 52% of respondents expect slower revenue growth in 2026.
- Nearly 40% anticipate further consolidation as smaller banks struggle to meet capital adequacy requirements.
PwC analysts suggest that mergers and acquisitions could reshape the sector, particularly in Kenya and Uganda, where competition is intense.
ESG and Sustainability Reporting
A new dimension of compliance is emerging around environmental, social, and governance (ESG) reporting. Regulators are demanding greater transparency, and banks are being pushed to align lending practices with sustainability goals.
“ESG is no longer optional, it’s becoming a license to operate,” said a Rwandan banking executive. However, many banks admit they lack the systems and expertise to meet these standards, raising fears of penalties and reputational risks.
Regional Outlook
The survey paints a mixed picture across East Africa:
| Country | Trends Highlighted |
|---|---|
| Kenya | Regulatory tightening, fintech competition |
| Uganda | Rising capital requirements, consolidation pressure |
| Tanzania | Digital adoption accelerating |
| Rwanda | ESG compliance challenges |
| Mauritius | Stronger offshore banking oversight |
PwC’s 2026 Eastern Africa Banking Survey underscores a sector at a crossroads: banks must balance regulatory compliance with digital innovation while safeguarding profitability.
As one Ugandan executive summed it up: “We are navigating a perfect storm, regulators, customers, and shareholders all want more, faster. The winners will be those who adapt without losing trust.”
