Digital Lenders to Start Disclosing Hidden Fees - Money Weekly

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The great Benjamin Franklin uttered these words back in the 18th century, but they ring true today as they did back then, which is why I’m always here every Thursday to keep you informed about matters that affect your pocket. My hope is that the investment you make in reading Money Weekly will pay interest by helping you make smarter financial choices.

As always, Money Weekly means we get to look at the top stories affecting you and your money, and here are the top ones from this week.

Cost Of Goods And Services Up Following Fuel Price Increase

Fuel prices in the country have jumped to an all-time high of Ksh134.72 and Ksh115.60 for a litre of petrol and diesel, respectively, after the State partially withdrew the fuel subsidy that has cushioned Kenyans from high fuel prices since last year.

Complete withdrawal of the subsidy would have pushed the prices of a litre of petrol and diesel to Ksh155.11 and Ksh143.16, respectively. The state-backed fuel subsidy is supported by funds from the Petroleum Development Levy, which currently stands at Ksh5.40 for every litre of fuel purchased.

The fuel subsidy has kept prices at the pump unchanged for the last four months, but higher global fuel prices following the Russia-Ukraine conflict have depleted the fund, leading to the partial withdrawal of the subsidy.

The hike in fuel prices will cause a similar hike in the cost of various goods and services, making life even more challenging for Kenyans.

The Kenya Transporters Association (KTA) has already instructed its members to increase their transport costs by a minimum of 5%. With fuel costs contributing up to 35% of total direct transportation costs, the transporters association say that the increase has wiped out their margins, hence the need to pass the costs to their customers.

Meanwhile, food production is also expected to become more expensive since most farm machinery relies on diesel. Following the increase in the cost of diesel, the cost of ploughing an acre of land in the North Rift has jumped from Ksh2,300 in the last planting season to Ksh3,000 this planting season.

The cost of other farm preparation activities like reploughing, harrowing, and planting is also expected to go up, which will, in turn, push up the cost of food.

The cost of manufactured will also go up since most manufacturers use diesel to power their factories. For instance, Bamburi Cement has announced a 10% price increase on some of its products, including the Tembo, Nguvu, and Fundi cement brands.

Public Service Vehicles (PSV) operators might also hike their fares in the coming days, making it more expensive for Kenyans to get to their places of work and other destinations.

Digital Lenders To Disclose Hidden Fees Starting From September

Starting from September, Digital Credit Providers (DCPs), who lend money to borrowers through mobile platforms, will be required to furnish borrowers with information about all charges associated with a loan before disbursing the funds. This includes interest rates, processing fees, and late payment penalties.

The DCPs will also be required to acquire new licences from the Central Bank of Kenya (CBK) before September, failure to which they will be barred from operating in the country. These requirements come as part of the Central Bank Act, 2021, which will be gazette into law this month.

The new regulations aim to bring sanity in an industry where lenders keep some loan fees hidden until after one has taken the loan, leaving borrowers paying interests that can get as high as 520% when annualised.

Under the new regulations, digital lenders will also have to seek CBK’s approval when setting prices for their loans and products, which will protect borrowers from exorbitant interest rates and charges.

The CBK Act, 2021, will also give Central Bank the powers to revoke the licences of digital lenders who share borrowers’ personal information with third parties, especially when going after defaulters. This measure will help protect borrowers from debt shaming. Debt shaming is a predatory tactic where digital lenders inform borrowers’ contacts – including family, friends, and even employers – about their defaulting loans to shame them into clearing the loan.

Digital lenders who do not comply with these regulations by September this year will have their operating licences revoked.

State Pushes For Return Of Tolling On Major Roads And Bridges

The state is pushing for a new law that will see motorists pay toll fees to use various new and existing roads, bridges, and tunnels.

The new law, dubbed the Public Finance Management (National Road Toll Fund) 2021, has already received the approval of the National Assembly’s Committee on Delegated Legislation and is now awaiting approval by Parliament.

Should the law be passed, it gives the Transport Cabinet Secretary the powers to declare any public road or a portion of a public road as a toll road. The tolling will apply on roads with enough traffic to generate significant revenue for the government, such as Thika Road, the Nairobi-Mombasa Highway, the Nairobi-Nakuru Highway, and Nairobi’s Southern Bypass. Roads like Jogo, Road, Ngong Road, and Lang’ata Road could also be targeted.

Road tolling is not a new concept in Kenya. The government first introduced tolling in the late 1980s but later abolished it in the mid-1990s after toll booths became corruption havens. 

Instead, the government opted for the Road Maintenance Levy, which eliminates corruption and provides a more efficient way of collecting funds for the construction and maintenance of public roads. Today, Kenyans pay a Roads Maintenance Levy of Ksh18 for every litre of petrol of diesel purchased.

The introduction of road tolling will amount to double taxation since Kenyans are already paying the Roads Maintenance Levy, which was a replacement for toll fees. If parliament passes the proposed law, road tolling will start with the new financial year on July 1st.

Government Steps In To Control Cooking Gas Prices

The government has announced that it has given the National Oil Corporation of Kenya (Nock) the exclusive right to import 30% of all cooking gas imported into the country. The move comes as the State seeks to put a leash on cooking gas prices, which are at an all-time high.

By importing 30% of LPG, the State hopes to influence market prices and force avaricious private importers to lower their prices.

National Oil Corporation of Kenya was initially formed to influence and stabilise fuel prices but ended up following market forces dictated by private importers instead of influencing them. By giving Nock exclusive importation rights, the government hopes that Nock will gain an advantage that will help it play its role in influencing market prices.

Currently, cooking gas prices are subject to the market forces of demand and supply, which have pushed the prices to an all-time high. Today, refilling a 13Kg gas cylinder costs Ksh3,200, up from Ksh2,200 in June before a 16% tax was imposed on the commodity.

Other Money News

• Kenya is experiencing a shortage of eggs, which has pushed up prices by 25%. Today, the average price of an egg is Ksh15, up from Ksh12 in early February, while the cost of a crate of eggs jumped from Ksh360 in February to Ksh450. The shortage results from the increase in poultry feed prices, with a 50Kg bag of layer’s mash now selling at Ksh3,100, up from Ksh2,500 at a similar time last year.
• Building and buying homes in Kenya will get more expensive following a sharp rise in the global price of steel, which is a crucial material in the construction industry. Prices have soared mainly due to the Russia Ukraine conflict and resulting sanctions. Russia and Ukraine supply close to 20% of the steel in the global market.
• The government has announced plans to lift the ban on the scrap metal trade, which came into place in January to fight vandalism of public infrastructure. Once the ban is lifted, the business will only be open to licensed operators. Licensing will cost Ksh250,000 annually for dealers, millers, and smelters, Ksh150,000 for agents, and Ksh50,000 for jua kali collectors. 

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