Govt to Pay Sacked Workers, NHIF To Penalise Unregistered Adults - Money Weekly

The past month has been a tough one, and not just locally. January saw the crash of crypto markets and the poorest performance of the stock markets since the 2008 global financial crisis. Locally, January came with a sharp increase in motor insurance costs, while pushing the Kenya Shilling to its lowest point ever against the green buck.

Fortunately, the ever-so-tough first month is finally over, and as we settle into a hopeful February, let’s take a look at some of the top money news that will affect how you spend the money in your pocket.

Adults Who Fail to Register With NHIF to Face Penalties

The National Health Insurance Fund (NHIF) is developing regulations that will see Kenyans above the age of 18 face penalties for failing to register with the national health insurer. This follows the passing of the NHIF (Amendment) Act 2021, which made it compulsory for all adult Kenyans to be insured under the fund.

The insurer hopes that the adoption of the draft regulations will make it possible for the NHIF (Amendment) Act, 2021, which was gazetted on January 28, to be operationalised. The draft regulations will be tabled before Parliament later this month.

The Act makes it an offence for a Kenyan adult to fail to register with the fund, but it doesn’t specify how such persons will be dealt with, which makes implementation challenging. Under the draft regulations, unregistered Kenyans could face fines not exceeding Ksh1 million.

Kenyans who register with the insurer will be expected to pay a minimum of Ksh500 monthly, or Ksh6,000 per year. The government will, however, cover this cost for vulnerable Kenyans who cannot afford the monthly payment.

Among those who are categorised as vulnerable according to the Act are the elderly, persons living with disability, widows and widowers, and orphaned and vulnerable children.

Government to Set Up Fund For Sacked Employees

Following successful stakeholder mapping, the Labour Ministry is now ready to move to the next step to set up a fund that will provide temporary relief to salaried employees after they lose their jobs.

Under the fund, dubbed the Unemployment Insurance Fund (UIF), employees who lose their jobs as a result of unexpected economic shocks will receive a portion of their salary for a period of up to six months, within which they’ll be expected to have secured another job.

The creation of the fund is a reaction to the shocks caused by the Covid-19 pandemic, which led to the loss of close to 1 million jobs. Should the fund be implemented, employees will be expected to contribute 1% of their monthly salary to the fund, which will also be matched by employers.

With an estimated wage bill of Ksh2.97 trillion in the country in 2020, the fund will generate a minimum of Ksh43.94 billion every year.

The Federation of Kenya Employers (FKE) has, however, made it clear that it is not in support of the proposed Unemployment Insurance Fund. The employers’ lobby instead wants the government to create an Employment Insurance Fund (EIF), which will provide struggling companies with money to keep their employees on the payroll during periods of unforeseen economic crises.

Under such a scheme, workers will maintain a disposable income while remaining productive, thus supporting economic recovery, rather than receiving money without being productive.

The fate of the fund will depend on the outcome of engagements between the Labour Ministry, the Central Organisation of Trade Unions (COTU), and the Federation of Kenya Employers (FKE).

Digital Lenders up in Arms Against CBK Oversight

The Central Bank Bill, 2021, passed into law last year, gave the Central Bank of Kenya (CBK) unilateral powers to cancel the licences of digital lenders found breaching the confidentiality of their customers. 

In response, the digital lenders have protested against this move, terming it as punitive and saying that it will create an uncertain regulatory landscape.

Speaking through their umbrella body, Digital Lenders Association of Kenya (DLAK), the lenders who operate chiefly on the mobile space said that they want the provision granting CBK the power to cancel licences expunged from the Digital Credit Providers Regulations, 2021, which fall under the Act.

The Digital Credit Providers Regulations, 2021, were meant to prevent digital lenders from sharing information about loan defaulters with third parties in a bid to shame the defaulters into repaying their loans. The sharing of personal information is one of the biggest concerns among Kenyans who borrow money from digital lenders.

The digital lenders, however, feel that the government should apply different criteria for revoking licences, terming licence revocation as the worst form of punishment for digital borrowers.

Reprieve as Inflation Hits 12-Month Low

Kenyans have a reason to smile after the rate of inflation in the country fell for the fourth consecutive month, lowering with it the cost of living.

According to data by the Kenya National Bureau of Statistics (KNBS), the inflation rate in the month of January fell to 5.39%, down from 5.73% in December. The inflation rate has been on a continuous descent since September last year when it hit a high of 6.91%. The rate of inflation recorded in January 2022 is the lowest since January last year.

Between the months of December and January, “the Housing, Water, Electricity, Gas, and other Fuels” index fell by 0.75%. This decrease is a direct result of the government’s decision to lower the price of electricity by 15% in January.

The Transport index also experienced a 0.11% decrease, which is a result of the government’s decision to keep petrol and diesel prices unchanged.

Despite the decrease in the general inflation rate, the rate of inflation for food items went up by 1.07% between December and January. The price of a kilo of sifted maize increased from Ksh118.71 in December to Ksh126.31 in January.

Meanwhile, the price of a kilo of Sukuma wiki rose from Ksh56.17 in December to Ksh59.36 in January, while the cost of a kilo of onions rose from Ksh123.43 to Ksh127.94 between the two months. Other food items that have experienced an increase in prices include mangoes, potatoes, wheat flour, and carrots.

Despite the rate of inflation decreasing in January, the cost of living could skyrocket again due to the effect of the upcoming polls. Electioneering years usually increase the supply of money in the country without a matching increase in the supply of goods and services, leading to increased inflation.

The highest rates in Kenya since independence have been recorded during election years, and experts believe 2022 will be no different.

Other Money News

• Despite Kenya being among the leading countries in the world in terms of cryptocurrency adoption, Central Bank of Kenya (CBK) governor Patrick Njoroge said on Thursday that CBK has not changed its stance on the use of cryptocurrencies in the country. CBK issued a circular in 2018 prohibiting local banks from transacting with firms or individuals dealing with digital currencies like Bitcoin.
• 72% of senior managers in top Kenyan banks and microfinance institutions expect demand for loans to grow exponentially in 2022, attributing the expected growth in demand to the ongoing economic recovery. However, uncertainty associated with the upcoming elections could negatively affect the growth of private sector credit.
• Safaricom and the National Social Security Fund (NSSF) have entered into a partnership that will give Kenyans access to NSSF services through the M-PESA Super App. Through the NSSF Mini App embedded in the M-PESA Super App, customers will be able to sign up as NSSF members, make contributions to the fund, and keep track of their contributions.