If Parliament passes new tax standards suggested in the Finance Bill 2022, digital lenders are warning of rising interest rates.
Kevin Mutiso, the chairperson of the Digital Lenders Association of Kenya (DLAK), claimed during an interview on Citizen TV on Thursday, June 16, that the 20% exercise duty envisaged in the Bill will have to be borne by the borrowers.
He explained that the lenders were unable to bear the fees because the vast majority of them were losing money.
Furthermore, Mutiso stated that the majority of lenders have already finalized their financial year budgets, and that the new tax ideas will have an influence on their operations if they are passed.
“When taxes are introduced unexpectedly into the system, we as investors are unable to plan, and as a result, we are currently undergoing the compliance process.” “We’ll have to pass the cost on to the consumer and then figure out how to reduce it,” he said. “We’ll have to pass the cost on to the consumer and then figure out how to lower it.”
The exercise requirement was proposed in a report presented to the National Assembly by the Finance Committee led by Homabay Woman Representative, Gladys Wanga, to help the Kenya Revenue Authority fulfill its tax collection targets.
The Committee report stated, “The First Schedule to the Excise Duty 2015 is changed by inserting the following provision, excise duty on fees charged by digital lenders at a rate of 20%.”
Following the passage of the Central Bank Act of 2021, interest rates imposed by digital lenders are now approved by the Central Bank of Kenya (CBK).
Currently, the bulk of digital lenders charge interest rates ranging from 15% to 19%.
Concerns were raised about the compromise of Kenyans’ personal information when people complained of being contacted about loans taken out by friends and family.
According to the Kenya National Bureau of Statistics and the Central Bank of Kenya’s FinAcces Household Survey, over 14 million Kenyans take out loans through digital lenders in 2021.