Return Of Mobile Cash Transfer Fees, Vehicle Insurance Up By 50% - Money Weekly

2021 has been full of ups and downs, but all in all, it has been quite a phenomenal year. With this being the final edition of Money Weekly this year, and with full knowledge of how tough Njaanuary can get, I am here to bring you the top money news from the last 7 days that might have an effect on your pocket in Njaanuary and beyond. 

Banks Want Mobile Cash Transfer Fees Reinstated

Banks want the Central Bank of Kenya to remove the ban on fees for cash transactions from bank accounts to mobile money wallets. 

The ban, which was effected in March last year to incentivize cashless transactions in a bid to contain the spread of Covid 19, has seen banks lose out on non-interest revenue, with banks like KCB losing Ksh1.5 billion in the period between March and December last year. 

Speaking to the press, the Kenya Bankers Association (KBA) chief executive Habil Olaka noted that with the easing of other Covid-19 containment measures, it is the right time for CBK to reinstate the charges on bank to mobile wallet transfers. 

Before the ban, banks used to charge customers between Ksh30 and Ksh197 to transfer money to their mobile wallets from bank accounts. KBA tried to lobby CBK to reinstate the fees at the end of last year, but their efforts were not successful. 

Motorists To Pay Up To 50% More For Vehicle Insurance

If you own a car in Kenya, you should expect to pay up to 50% more for comprehensive motor vehicle insurance starting from 1st January 2022. The price adjustments come following claims by insurers that the motor vehicle insurance business has been a loss making venture over the last couple of years. 

Already, some insurance companies have sent out notifications to their customers to alert them of the new pricing structure. Others have sent out memos with revised rates to their business partners and agents. 

A spot check shows that Sanlam customers who paid Ksh47,700 in premiums this year will now have to pay Ksh72,300 for the same cover starting from January 1st. 

Meanwhile, ICEA Lion customers who paid Ksh51,000 for comprehensive motor vehicle insurance this year will have to part with Ksh74,300 for the same cover next year. 

Insurance companies claim that over the last 20 years, the industry has been making losses of more than Ksh3.27 billion every year, with the losses attributed to price undercutting and insurance fraud. 

It is not clear, however, why the insurers have opted for increased premiums as the solution, rather than trying to prevent price undercutting and insurance fraud. 

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Safaricom, Airtel Kenya In Fight Over Call Rate Cuts

Safaricom has turned to the Communications and Multimedia Appeals Tribunal to appeal the decision by the Communications Authority (CA) to effect an 87% reduction in the mobile termination rate (MTR). The telecommunications giant claims that the move is unprocedural and wants the tribunal to declare the decision as invalid. 

Meanwhile, rival Airtel Kenya has hit back at Safaricom for opposing the decision to slash the MTR, with Airtel claiming that Safaricom is contesting the decision as a way of protecting its revenues from rivals. 

MTR refers to the charges that a mobile service provider charges other providers for calls originating from their network to its network. Last week, CA announced that effective January 1st, the MTR would reduce to Ksh0.12 per minute, down from the current Ksh0.99 per minute. 

Every year, Safaricom earns about Ksh6.5 billion in MTR from rival networks, while it only pays out Ksh2.6 billion to these networks. 

Airtel, on the other hand, pays an estimated Ksh5.5 billion to its rivals every year. Under the new rates, Airtel’s MTR bill will fall to just Ksh676 annually. With the telco having made a loss of Ksh5.6 billion in 2020, the new rates could potentially return the company to profitability. 

The new rates will also see Safaricom reduce its MTR bill from Ksh2.6 billion to just Ksh321 million, but its MTR revenue will also fall to Ksh782 million from the current Ksh6.5 billion. 

It is expected that the slashing of the MTR will reduce operating costs for telcos, leading to lower calling rates for customers. However, telcos are not obligated to lower their prices even if the new CA rates take effect. 

No Tax Refunds Starting From January 1

Starting from January 1, 2022, the Kenya Revenue Authority (KRA) will no longer pay tax refunds to those who overpay their taxes. Instead, the taxman will use the overpaid duties to offset a taxpayer’s future tax obligations. 

These changes are part of the Finance Act 2021, and are aimed at solving the delays that are normally associated with tax refunds. 

Currently, the taxman is allowed by law to make tax refunds within 2 years from the date of the refund application. If the refund is not issued within this period, the amount starts accruing a monthly interest of 1%. 

Despite the ample time given to issue refunds, KRA has still been grappling with refund delays, which it attributes to inadequate cash from the Treasury, as well as delays in auditing the refund claims. The interest accrued on delayed refunds puts even more pressure on the taxman. 

With the new changes, rather than have to deal with settling refunds, KRA will instead use the overpaid amounts to settle the taxpayer’s outstanding tax liabilities, or to offset the taxpayer’s future tax liabilities. 

Women Hardest Hit By Covid-19 Job Losses

The job losses occasioned by the Covid-19 pandemic affected women more than men, further entrenching the gender imbalance in Kenya’s corporate corridors. 

According to data made public by the Kenya National Bureau of Statistics (KNBS) last week, 115,409 jobs were lost by women in 2020, which is 61.9% of the 186,402 jobs lost last year. These layoffs led to even more gender inequality at the workplace, with the percentage of women workers dropping from 38.4% in 2019 to 36.8% last year. 

Experts reckon that women were more affected by the layoffs since the Covid 19 had a bigger impact on sectors that are traditionally female dominated, such as retail and hospitality. However, others believe that women were wrongly targeted, with more males in the C-suite influencing layoff decisions. 

Other Money News

• The price of maize flour is expected to go up after the National Cereals and Produce Board (NCPB) announced that it will pay 300 more for maize, pushing the price of a 90kg bag to Ksh3,000 from the current Ksh2,700. This, in turn, will force millers and traders to pay more when buying the produce from farmers. It is expected that millers will transfer the higher costs to consumers. 
• Projections by CBK show that the economy will grow by 6.4% in 2022. However, the Parliamentary Budget Office (PBO) terms these projections as too ambitious. PBO predicts that growth will be much lower due to the uncertainty surrounding next year’s general elections. 
• A survey by CBK shows that more Kenyans are abandoning traditional banking in favor of mobile banking. According to the survey, usage of traditional banking fell from 31.7% in 2016 to 29.6% in 2019, and then to 23.8% in 2021. Meanwhile, usage of mobile banking rose from 17.5% in 2016 to 25.3% in 2019 and 34.4% in 2021. 
• Starting from January 1, the National Hospital Insurance Fund (NHIF) will issue Ksh255 in relief to employees who pay the maximum monthly contribution of Ksh1,700, a move that will see employees save Ksh8.5 billion every year.

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