The history of banking in Kenya traces its roots to early European trade on the East African coast, chiefly Zanzibar, in the later part of the 19^th century. In 1887 Sir William Mackinnon, with the endorsement of the British Foreign Office, set up what later came to be known as the Imperial British East Africa Company (IBEAC).

The formation of the IBEAC captured the attention of the National Bank of India, (NBI) which entered into agreement with the East African representatives of the merchant company, Smith, Mackenzie & Co, to act as its banking agent on the East African coast.

Interest in banking began to steadily swell at the coast — especially after Britain declared a protectorate over Zanzibar in 1890. Three years later, National Bank of India set up office in Zanzibar at No.10 Portuguese Street.

In those formative years National Bank of India fortunes in East Africa were inexplicably linked to the fortunes of IBEAC, which, despite the patronage of the Foreign Office, was an independent corporate entity complete with its own flag, currency, postage stamps, private army and capital city consisting of a cluster of a few corrugated iron offices, warehouses and bungalows in Mombasa.

From Mombasa, the company established and administered several trading posts in the hinterland. It built the Mackinnon Road and later made an attempt to build a railway line from Mombasa to Lake Victoria. Construction of the railway line was abandoned seven miles inland from Mombasa after IBEAC ran out of money and skilled labour.

IBEAC was wound up in March 1895 and replaced by the East Africa Protectorate (EAP), a system of administration that involved more direct British government control through the Foreign Office. Perhaps encouraged by the turn of events, National Bank of India established its first branch in Mombasa the following year.

In the same year, East Africa Protectorate started building a railway line to Kisumu. National Bank of India was appointed the official banker for the venture, marking the beginning of the bank’s long and handsomely profitable relationship with what later became the colonial government of Kenya.