New Debt Collection Terms for Digital Lenders - Money Weekly 

It has been an eventful last seven days in the world of money. The cost of electricity shot up significantly, undoing former President Uhuru Kenyatta’s grand December 12, 2021 Jamhuri Day pledge of a 30% reduction in power costs. 

The window for digital lenders to apply for a CBK licence closed on Saturday 17, only 10 out of 288 applications have been approved. A proposal to increase the minimum NSSF deduction tenfold to Ksh2,068 was stopped in court representing one of the earliest roadblocks to President William Ruto’s social security plans. 

This is as KRAs intention to implement an inflation adjustment tax is causing a stir due to its impact on the cost of living.

For this and more, here’s a look at the money news that made the headlines over the last week and what it means for your pocket.

New Regulations For Digital Lenders

With the lapse of the deadline to apply for a CBK licence by September 17, 2022, all save for 288 digital lenders in Kenya are to cease operations forthwith. 

Out of these applicants only 10 have secured licences with the regulator stating that those yet to be approved were withholding information that could eventually lead to an outright denial of a licence.  

This is the culmination of a protracted process of bringing unregulated lenders under the supervision of the CBK - which now has the legal authority to control their interest rates and conduct.

Under the new regulation all digital lenders, their employees or agents in the process of debt collection will not be allowed to:

• Use profane or obscene language.
• Contact a client’s contacts via calls or texts without authorization.
• Engage in improper or unconscionable debt collection tactics.
• Threaten, use violence or any other criminal means to physically harm a client, his/her reputation or their property.
• Undertake any other strategy aimed at harassing, oppressing or abusing any person when looking to collect a debt.

Digital lenders will also have to reveal all the terms of their credit to borrowers from the onset.

The 10 licensed digital lenders are: Mwanzo Credit Limited, Sokohela Limited, MyWagepay Limited, Rewot Ciro Limited, Ceres Tech Limited, Giando Africa Limited, Getcash Capital Limited, Kweli Smart Solutions, Jijenge Credit Limited and Sevi Innovation Limited.

Read More: Only 10 Digital Lenders Have CBK Approval 

EPRA Increases Electricity Prices 

On September 15, 2022, the energy regulator increased the price of electricity by 15.7%, effectively negating the price cuts that were effected in January 2022 - tranch one implementation of President Uhuru’s pledge.

The latest increase in fuel, forex and inflation adjustment costs means domestic consumers who use more than 100 units a month will now get 39.5 units of power for Ksh1,000, compared to the 45.7 units received for the same amount prior to the price review. Heavier consumers will see even higher price increases. 

With a unit of electricity increasing to Ksh25.3 per kilowatt hour (kWh), the promise of a gradual reduction to Ksh16 which is way past the April 2022 deadline is a distant dream.

EPRA did not detail the reason behind the price adjustment, however, the fact that the fuel levy cost has now increased by 43%, coupled with the forex cost being doubled points towards the recent increase in fuel prices and the weakening Shilling as potential catalysts.

Following the increase in the cost of energy, experts have projected a spike in the cost of production which will then lead to a rise in the cost of consumer goods as well.

Kenyans are currently already burdened with the highest rise in the cost of living recorded over the last half a decade.

Read Also: Rising Inflation: Where Should You Keep, Invest Your Money?

Push to Relax Rule on Reporting Large Cash Transactions 

Members of the National Assembly have called for the current stipulation for banks to flag and verify any transactions of Ksh1 million and above to be adjusted upwards.

The legislators are proposing that the threshold be moved to transactions of Ksh10 million and above.

Under the current regulation, bank customers are mandated to disclose the source, beneficiaries and intended use, when their transaction (deposit or withdrawal) hits the Ksh1 million mark.

This is in place in compliance with regulation 31 of the Proceeds of Crime and Anti-Money Laundering Regulations, 2013, to curb any illicit financial flows.

Under the regulation, financial institutions are required to report any suspicious deals to the Financial Reporting Centre.

According to the MPs, the current ceiling has been an unnecessary hurdle that has stunted the growth of small and medium-sized enterprises that mostly deal in hard currency.

Speaking to the media, Imenti Central MP Moses Nguchine revealed during a meeting in Naivasha that was chaired by President William Ruto, it was agreed that the limit should be moved to Ksh10 million, adding that they would push for the same in the National Assembly.

Read Also: Lessons From 2020: Missing Jail by a Whisker in a Money Laundering Scheme

Treasury Spending Spree?

According to a report by the Business Daily published on September 21, 2022, the National Treasury spent Ksh23 billion without parliamentary approval in the weeks leading up to the inauguration of President William Ruto.

Documents tabled in Parliament on September 20, 2022, show how the funds were disbursed;

• Ksh810 million to State House
• Ksh2.2 for building the military research hospital
• Ksh4.5 billion for the maize flour subsidy
• Ksh9.45 billion for road construction
• Ksh6 billion to Telkom Kenya

In line with the Constitution of Kenya, the Treasury invoked Article 223 which gives it the power to spend money without the approval of Parliament.

The Ksh23 billion is a fraction of the Ksh54.6 billion that the Treasury had committed to withdraw and spend without the need for parliamentary approval.

From the unapproved allocation, the National Treasury is yet to disburse an additional Ksh2.8 billion to State House, Ksh1.3 billion to the military hospital, Ksh16.5 billion for fuel subsidies and Ksh8.1 billion to schools.

The Treasury is now looking to the National Assembly to regularise the expenditure, a loophole that the Parliamentary Budget Office (PBO) says the 13th Parliament has to seal. 

Read Also: 5 Investments Types Two-income Couples Should Try

MPs Push for Separation of M-PESA From Safaricom

During a parliamentary induction session with CBK Governor Dr Patrick Njoroge on September 20, 2022, Dagoretti South MP John Kiarie proposed the separation of M-PESA from Safaricom.

The legislator argued that despite being registered as a communications company, the firm in question also serves as a financial institution.

Kiarie argued that under its current status, Safaricom and similar firms are only regulated by the Communications Authority (CA), adding that their financial services product offering ought to be regulated by the CBK.

The MP sought clarity on whether the National Assembly could help the banking regulator with legislation that would see telecommunication companies register their financial services arms as independent units that could then be regulated by CBK.

In March 2022, the CBK Governor, while making a presentation to the Senate ICT Committee, stated that the separation of M-PESA from Safaricom would improve regulation and customer protection.

The 61 million daily transactions handled under the M-PESA banner makes it the largest fintech provider in Africa.

The telco CEO Peter Ndegwa earlier this year hinted at the inevitability of this separation.

Read More: Safaricom to Split, Zero-Interest Loan Halted - Money Weekly 

Court Rules Against Increasing NSSF

On September 20, the High Court ruled against a bid to increase the National Social Security Fund (NSSF) monthly contribution to Ksh 2,068 from the current Ksh 200.

In their ruling, Justices Monica Mbaru, Hellen Wasilwa and Mathews Nduma declared some sections of the NSSF Act of 2013 unconstitutional as regards to creating a monopoly in the provision of pension and social security services and having no opt-out options.

The proposed increment was aimed at helping the Fund to raise a bigger pool that would see it offer retirees monthly stipends as opposed to a one-off payment, as is the current norm.

The NSSF contribution last came under review in 2001, following which the amount was increased from Ksh 160 to Ksh200.

This mandatory minimum amount has been the subject of heated debate as to how practical it is in the quest to fund a comfortable retirement lifestyle for the citizenry - parallels have been drawn with other African countries including Uganda that have much higher minimums. 

Read Also: How to Build a Concrete Retirement Plan

MPs Sitting Allowances Back?

Parliamentary Service Commission (PSC) Chairperson – Moses Wetangula on Tuesday, said that the commission held talks with the Salaries and Remuneration Commission (SRC) centred on ensuring the new MPs would not lose the perks that their predecessors enjoyed.

He assured legislators that nothing would change in regard to their allowances and mileage reimbursements.

This follows the August 2022 decision by the SRC to abolish sitting allowances in plenary sessions, stating that the move would save Kenyan taxpayers Ksh1 billion annually.

However, the SRC directive maintained committee sitting allowances, capping it at Ksh120,000 per month for legislators, Ksh192,000 per month for vice-chairpersons, and Ksh240,000 per month for chairpersons.

This is not the first time that the lawmakers have challenged SRC pay cuts, having successfully overturned the decision to abolish their sitting allowances in July 2017. 

Read Also: The End of Huge Civil Servant Allowances 

6.3% Inflation Adjustment Tax Increase 

Starting October 2022, Kenyans will have to dig deeper into their pockets for some goods as a 6.3% inflation-adjusted tax will be effected by the Kenya Revenue Authority (KRA).

Some of the products set for price increases are bottled water, fruit juice, alcoholic drinks, cigarettes, and chocolate among others.

For example, the taxman will now take Ksh142.4 for every litre of beer consumed (up from Ksh134),  Ksh7.02 from every litre of water (up from Ksh6.6), Ksh14.14 for every 12 litres of juice (up from Ksh13.3), and Ksh 4.06 for filtered cigarettes (up from Ksh3.82).

The rates would be adjusted using the average inflation rate for the financial year 2021/2022, which amounts to 6.3%.

Manufacturers impacted by the new adjustment expressed concerns over whether their businesses could survive, arguing that the move would push their consumers to seek out cheaper alternatives or simply drop some habits.

The Kenya Association of Manufacturers said that the annual inflation adjustments by the taxman have not led to increased tax revenue, citing the 4.94% annual inflation adjustment on cigarettes in 2020 that resulted in a 12% decline in excise tax payments from the commodity.

Read Also: Financial Goals to Set Today and Achieve by December

Matatus Increase Fare

On September 16, 2022, matatus owners covering Kiambu county announced a 30% fare increase in the region.

For example, passengers moving from Thika to Nairobi in a 14-seater matatu will now pay Ksh130, up from Ksh100.

The recent rise in fuel prices was cited as the main reason for the fare adjustments.

Ksh1.5 trillion Nairobi-Mombasa Expressway Approved

Three firms are currently competing to land the tender to build the 473km Nairobi-Mombasa Expressway that has since been approved for construction.

According to the Kenya National Highway Authority (KeNHA), the project is expected to take 5 years, with work commencing once studies, designs and negotiations are completed.

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