Banks Propose New Tax Reliefs on Payslips Amid Govt Plan for PAYE Cuts 

Hello and welcome to the Money News Roundup Newsletter, where we are covering the banks' proposals on the capping of PAYE rates. We also cover the renewal of the AGOA deal by President Donald Trump.

Banks Propose 5% PAYE Cut Across All Income Bands 

The banking industry is urging the government to reduce Pay As You Earn (PAYE) tax rates by 5% across all income bands, arguing the move would restore workers’ purchasing power, support economic growth, and strengthen tax revenues.

In a proposal to the Treasury, the Kenya Bankers Association (KBA) recommended that the cut be coupled with a cap on the top PAYE rate at 30%, in line with the 2023 National Tax Policy, which limits personal income tax rates to the corporate tax rate.

As reported by the Business Daily, the proposal comes a day after Treasury Cabinet Secretary John Mbadi announced plans to zero-rate PAYE for workers earning up to Ksh30,000 monthly, aimed at easing household costs. 

Banks, however, argued that relief targeting only low-income earners would not sufficiently address the growing tax burden on both employees and employers. 

The lobby highlighted the ongoing phased increase in National Social Security Fund (NSSF) contributions, which will see employer and employee contributions rise to 6% of pay by February 2026, further squeezing disposable incomes, particularly for workers and firms without occupational pension schemes.

Currently, earnings up to Ksh24,000 a month attract 10% tax, the next Ksh8,333 per month (Ksh100,000 annually) is taxed at 25%, Ksh467,000 at 30%, Ksh767,000 at 32.5%, and higher earnings at 35%. 

The KBA said a uniform 5% reduction with a 30% top rate would boost household consumption, stimulate sectors such as manufacturing and agriculture, and broaden the tax base, generating more resilient government revenues through VAT, excise duty, and corporate tax collections. 

US Extends AGOA Trade Deal to 2026

The United States has extended the African Growth and Opportunity Act (AGOA) to December 31, 2026, after President Donald Trump signed legislation reauthorising the programme, giving short-term certainty to African exporters dependent on the US market.

As reported by the Star, the extension ensures no disruption to duty-free access for eligible countries and sectors such as apparel, agriculture and manufacturing.

AGOA allows qualifying African states to export more than 1,800 products duty-free, in addition to over 5,000 items covered under the Generalized System of Preferences.

US officials said the one-year extension allows time for reforms aligned with America First trade priorities, including reciprocity and market access for US firms.

For Kenya, AGOA remains vital for EPZ apparel, tea, coffee and horticulture exports, even as stricter eligibility rules raise pressure to diversify markets and deepen AfCFTA trade. 

Govt Limits Passport Applications to 66-Page Booklet Costing Ksh12,500 

Applicants for Kenyan passports can now only apply for the 66-page ordinary “C” series on the government’s e-Citizen portal after the 34-page and 50-page options were removed. 

According to the Eastleigh Voice, the dropdown menu no longer displays the cheaper “A” and “B” series, effectively forcing all applicants to select the most expensive booklet. Although the application page still lists all options, selecting the smaller booklets automatically defaults to the 66-page passport.

As of February 4, 2026, the only available option costs Ksh12,500, up from Ksh7,500 and Ksh9,500 previously charged for the smaller booklets.

The government has not issued an official explanation on whether there is a shortage of the smaller booklets or if the eCitizen platform has a technical issue. The move follows the July 2025 withdrawal of the 34-page passport, earlier blamed on supply challenges.

Existing Loan Holders Exempt From Fees Under New Loan Pricing Model Starting March

Starting March, customers with existing loans in Kenya will not pay origination or processing fees under the new Risk-Based Credit Pricing Model (RBPCM). 

As reported by the Business Daily, Banks have confirmed that facilities disbursed before December 1, 2025, will be exempt from fees such as origination, processing, negotiation, and commitment charges, which only apply to new loans or top-ups.

All existing loans are being transitioned to the RBPCM ahead of the February 28 deadline, with customers required to sign off on new terms.

 Most banks, including KCB, DTB, Equity, NBK, and SBM, are now benchmarking loan costs on the Central Bank Rate (CBR), while a few use the Kenya Shilling Overnight Interbank Average (KESONIA).

 Average commercial bank loan rates fell to 14.82% by December 2025 from 16.9% in 2024, supporting affordability and transparency in lending.

Safaricom Raises Interim Dividend by 54.5% to Ksh0.85 per Share

Safaricom has announced an interim dividend of Ksh0.85 per ordinary share for the financial year ending March 31, 2026, up from Ksh0.55 paid last year. 

As reported by the People Daily, the dividend was approved by the board on February 4, 2026, and will be paid on or about March 31, 2026, to shareholders on the register as of February 25, 2026.

The payout represents a 54.5% year-on-year increase, reflecting strong half-year performance. 

For the six months to September 30, 2025, Safaricom reported an 11.1% rise in service revenue to Ksh200 billion, driven by data and M-Pesa growth. 

Net income jumped 52.1% on higher usage and tighter cost controls. With about 40 billion shares in issue, the interim dividend could see the firm distribute more than Ksh34 billion to shareholders.

Lofty Corban Unveils Private Debt Special Fund to Provide Loans to Saccos, NGOs

Lofty Corban Investments has launched a private debt-focused special fund targeting institutional, corporate and retail investors, as asset managers tap into growing demand for alternative income products and non-bank financing.

As reported by the Kenyan Wall Street, the Lofty Corban Private Debt Special Fund will invest mainly in commercial paper and privately originated credit, providing capital to Saccos, NGOs, trusts and foundations. Structured as a collective investment scheme, the fund aims to generate stable income through contractual interest payments.

Chief Executive Officer Stanley Mutuku said the vehicle will pool investor capital to finance carefully selected borrowers, supported by credit assessment, diversification and continuous monitoring.

The launch comes as Kenyan enterprises face an estimated Ksh2.4 trillion financing gap amid cautious bank lending and rising non-performing loans. Falling government securities yields have also pushed investors to seek higher-return private market opportunities.

High Interest Rates Cool Kenya’s Residential Property Market in 2025

Kenya’s residential property market slowed in 2025 as demand for new homes eased and price growth softened, according to Knight Frank. 

The sales price index was recorded at 6.17% in the 12 months to December 2025, down from 8.27% in 2024, while prime rents increased by 4.05% compared with 7.46% the previous year. 

The slowdown was driven by high mortgage rates averaging 14.9%, which continued to strain affordability.

Construction activity also weakened, with residential approvals falling 27% year-on-year to October, prompting developers to focus on completing existing projects. Investment increasingly shifted to gated communities in areas such as Runda, Kiambu Road and Limuru. 

Land scarcity and limited buyers for standalone homes priced above Ksh100 million have pushed developers toward high-end apartments in Westlands, Riverside and Kileleshwa. The market is expected to remain active in 2026, supported by diaspora, expatriate and high-net-worth buyers. Read more

Absa Explores Kenyan Bank Acquisition to Boost Retail Market Share

Absa Bank is exploring the acquisition of a Kenyan lender to expand its retail banking market share and diversify income. Absa aims to grow its household and small-business lending as part of a strategy to reclaim scale in Kenya and East Africa. 

CEO Kenny Fihla said the bank continues to explore opportunities, provided the regulatory environment is supportive.

Absa’s renewed retail push follows years of branch cutbacks, which saw its outlets fall from 121 in 2016 to 83 in 2023, as rivals KCB, Equity, and Co-operative Bank expanded aggressively. Its assets stood at Ksh606 billion in 2024, ranking fifth behind KCB (Ksh1.27 trillion), Equity (Ksh1.02 trillion), Co-operative (Ksh687.8 billion) and NCBA (Ksh588.7 billion).

Fihla noted that retail banking is key to gathering cheap deposits for lending and regulatory liquidity, while increasing relevance to the market. 

The bank’s expansion aligns with broader South African and Nigerian bank interest in East Africa, as seen in Nedbank’s NCBA acquisition and Zenith Bank’s Paramount Bank deal. Read more