A person holds up a wad of new Kenyan currency notes in Ksh.1,000 denomination. Photo: File Amendments to the the Excise Duty Act carried in the 2021 Finance Act effected a 20 per cent duty charge to fees and commissions on loans, a change which took effect on July 1.
AIB-AXYS projects the new taxes to hit harder at mobile/digital lenders who greatly rely on the fees and commissions to primarily derive revenues.
Costlier loans are likely to impact the demand for credit by customers even as private sector credit growth remains depressed, partly from reduced disbursements by banks.
New taxes on loan fees and commissions are expected to hit out and not just customers but also commercial banks.
This is according to a new banking sector report by stock brokerage firm AIB-AXYS Africa which sees negative growth in revenues earned by lenders and higher costs for bank clients.
Amendments to the the Excise Duty Act carried in the 2021 Finance Act effected a 20 per cent duty charge to fees and commissions on loans, a change which took effect on July 1.
“This is expected to negatively affect the growth of fees and commission income. It is likely that most banks will pass this higher costs to customers which will increase the cost of credit at a time when the Central Bank of Kenya (CBK) is trying to spur private sector credit growth as it seeks to buoy economic growth,” reads part of the stock brokerage report.
AIB-AXYS projects the new taxes to hit harder at mobile/digital lenders who greatly rely on the fees and commissions to primarily derive revenues.
“Mobile lending is likely to be the most affected product as the bulk of the charges on this product are fees and commission as opposed to interest income. We could also see banks increase the interest charged on this products and reduce some of their fees. The uptake of mobile loans might decrease as a result of this development,” added the report.
Costlier loans are likely to impact the demand for credit by customers even as private sector credit growth remains depressed, partly from reduced disbursements by banks.
According to data from the Central Bank of Kenya (CBK) private sector credit growth contracted to 6.8 per cent in 12 months to April 2021 but banks marked significant repayments and recoveries on previously issued loans.The number of new loan applications meanwhile picked up in May following […]