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MPUTHIA: Housing fund levy timely in delivery of low-cost homes

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President Uhuru Kenyatta
President Uhuru Kenyatta signs into law the Finance Bill 2018 and Coast Guard Service Bill at State House last week. FILE PHOTO | NMG 

There is a lot of debate about the proposed housing levy that Treasury secretary Henry Rotich proposed during his Budget presentation. The government plans to establish a National Housing Development Fund to manage the fund. The fund levy will be a deduction of 1.5 per cent of an employee’s earnings with the employer expected to match the amount.

Contributors to the fund can then access financing to buy low-cost homes, either through tenant purchase agreements or other schemes.

Most employers and employees do not support the proposal. For employers, it means higher staff costs while employees have complained that the levy puts a strain on an already highly taxed income.

The proposal is in line with the Big Four agenda where the provision of low-cost housing is one of President Uhuru Kenyatta’s legacy projects.

My independent view is that the levy is timely and in fact, is the practice in other countries.

The proposal subjects the reductions to a maximum of Sh5,000. This may not be a big amount for those in the high-income bracket. Furthermore, the employer also contributes a similar amount to the fund.

A lot of people have home ownership as one of their dreams. Currently, home ownership is out of the reach for many. The average Kenyan cannot afford to build their own home. Furthermore, the cost of borrowing is very high and not many people are able to afford a mortgage.

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The government proposal very promising as it enables individuals to access a cheaper home ownership alternative.

Perhaps the most important thing would be for good governance of the housing fund to ensure that contributions are safeguarded.

The passing of the Finance Bill in Parliament and its prompt signing into law last week by Mr Kenyatta means there will be changes to employment laws in Kenya.

From the proposal, it is clear that the employer is an agent of the fund by ensuring the deduction and remittance is made. The new law is also expected to affect the employment contracts.

Some employers provide house allowance to their staff while others provide mortgage schemes. Section 31 of the Employment Act provides for house allowance. A lot of employees especially those in senior management levels do have house allowance and some have access to staff mortgage schemes. It is therefore not clear how the new proposal for the housing fund levy would benefit such class of employees.

The proposal is not clear on how those who are in self-employment would be able to participate in the scheme. Perhaps there should be provisions for voluntary participation for those who are self-employed or unemployed to be able to participate and benefit from this proposal.

There is currently in place the Housing Act, a 1953 Act whose main purpose was to provide loans to enable purchase or construction of houses.

Perhaps the new Act would seek to overhaul the old law and establish a new one or amend parts of it.

However, the question is what would be the role of the already existing National Housing Corporation vis a vis the National Housing Fund? Section 6 of the current Housing Act provides for the establishment of a housing fund.

Hopefully, there will be no duplication of roles.

Given the practice in other countries, I believe it is time that Kenya too moved in the same direction.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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