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Taxes push up bank charges

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CBK Governor Patrick Njoroge
CBK Governor Patrick Njoroge. FILE PHOTO | NMG 

Kenyan banks are racing to implement the doubling of excise taxes on fees they levy on transactions following the signing into law of the Finance Bill 2018 in a move that is expected to significantly increase the cost of banking.

Some of the lenders, including KCB #ticker:CBK , Sidian and Diamond Trust #ticker:DTK , have notified their customers of the decision to increase charges on all transactions beginning Tuesday this week.

“In line with the Finance Act 2018, the bank has increased excise duty from 10 per cent to 20 per cent on all bank fees and commissions with effect from 25/09/2018,” Sidian Bank said in a notice to its customers. 

KCB and DTB also sent similar notices. The tax is applicable on the fees banks charge on transactions, including bank transfers — both local and international — over-the-counter withdrawals as well as ATM and account fees.

Banks earned an aggregate of Sh70.6 billion in fees and commissions last year, indicating that the National Treasury will raise at least Sh7 billion from the tax.

The Treasury has also increased excise tax on mobile money transfers to 12 per cent from 10 per cent while the rate on telephone and Internet data services jumped to 15 per cent from 10 per cent.

For bank customers, the higher excise duty is expected to increase the charges from a few shillings to hundreds of shillings depending on the nature and value of the transaction.

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Banking services that attract fees and charges include obtaining account statements, ATM cash withdrawals and cheque clearance. Besides banks, the higher excise tax is to be charged by other financial institutions, including insurers and fund managers.

This move is expected to be particularly painful for banks who have been turning to commissions and fees to boost their profits.

This has resulted in a significant increase of revenue from these business lines that has helped mitigate the impact of narrower margins in the mainstay lending business.

Central Bank of Kenya Governor Patrick Njoroge said during the monetary policy committee (MPC) briefing that the new tax could slow down cash inflow in the economy.

Excise duty on bank charges was first implemented in August 2013 at a rate of 10 per cent with the exception of interest charges.

The Treasury had at the time sought to take a piece of the Sh32.8 billion that banks earned from operational fees and commissions annually.

All banks are expected to have implemented the 20 per cent excise duty, including those that are yet to communicate the same to their customers.

The lenders and other affected agencies have warned that introduction of higher taxes on financial services and mobile money transfers will hurt Kenya’s efforts to promote financial inclusion.

On July 1, telecoms operator Safaricom raised its mobile money transfer charges after the excise duty rose by two percentage points to 12 per cent.

The cost of withdrawing sums of between Sh501 and Sh2,500 from an M-Pesa agent, for instance, went up by between Sh1 to Sh28 while withdrawing Sh2,501 to Sh3,500 now attracts a charge of Sh50 compared to the previous Sh49.

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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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