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Tax push will erode financial inclusion, caution groups

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National Assembly Finance Committee Chairman Kuria Kimani (right) and vice chairman Benjamin Langat during the public participation on the Finance Bill 2024. [Boniface Okendo, Standard]

Financial sector players and special interest groups have warned the proposed tax measures in the Finance Bill 2024 could derail financial inclusion gains in the country.

They called for balanced policy-making to ensure revenue generation without exacerbating inequalities, particularly for vulnerable populations like people living with disabilities.

Speaking in Nairobi on Tuesday, Executive Director of the Kenya Society for the Blind Samson Waweru highlighted the disproportionate impact of tax proposals on individuals with disabilities, citing concerns over the increased cost of essential assistive devices.

Mr Waweru also cited other proposed tax measures in the bill, such as the Motor Vehicle Tax and the eco-tax, which he said could significantly escalate the cost of mobility aids like wheelchair components.

“People with disability are going to be hit hard by some of the tax proposals like the motor vehicle tax, where the government targets collecting Sh58 billion in the financial year 2024/25 through the tax which has been proposed at 2.5 per cent of the value of a vehicle with the floor set at Sh5,000 and the ceiling set at Sh100,000,” he said.

He spoke at the launch of the Chora Plan (plan your money) financial literacy campaign.

The plan by the Kenya Bankers Association (KBA) and partners seeks to promote economic growth and development by empowering individuals and businesses with the knowledge and skills necessary to make informed financial decisions in banking, insurance, and pension services.

NCBA Group Chief Executive and chairman of KBA Governing Council John Gachora emphasised the need for financial institutions to develop inclusive products and services tailored to the needs of people with disabilities.

“With a population of approximately 50 million people, only 38 per cent of Kenyans are financially literate. And out of this number, only 34 per cent of women in Kenya have access to formal financial services compared to 50 per cent of men.

Banks have between 15 to 40 savings products. Banks need to come up with products that are useful and consumer-friendly,” he noted. 

KBA acting Chief Executive Raymond Molenje underscored the importance of integrating financial literacy into the education system from an early age, saying individuals should be prepared for economic shocks.

He urged for comprehensive financial education, especially for people with disabilities.

Pesa Link Chief Executive Gituku Kirika noted the critical role of financial literacy in driving financial inclusion, especially in the wake of the Finance Bill, 2024.

Mr Kirika called on financial institutions to educate consumers about the proposed transaction costs so that they can plan ahead should the proposed law be passed in its current form.

The Finance Bill, 2024 introduces Value Added Tax (VAT) on various financial services, including issuing credit and debit cards, telegraphic money transfers, foreign exchange transactions, and cheque handling, among others. The increased cost of banking to customers, lenders say, will hamper financial inclusion efforts, particularly affecting low-income individuals and small businesses. 

Visa Country Manager Ngigi Sarwari urged for the integration of financial literacy into the curriculum at all levels of education, stressing its significance in empowering individuals, including those with disabilities, to make informed financial decisions. Central Bank of Kenya (CBK) Governor Kamau Thugge projected a positive economic outlook this year despite the increased financial budget on taxpayers.

Agricultural productivity

He expects a significant drop in inflation from eight per cent to five per cent on the back of increased access to finance, resilient infrastructure growth despite recent floods and a surge in agricultural productivity.

Dr Thugge also hailed the strong performance of the Kenyan shilling against major world currencies amid global uncertainties and noted the growth of Dhow Finance, indicating increased financial accessibility and innovation. He reiterated the CBK’s commitment to fostering financial inclusion.

While the government of Kenya has adopted laws and policies to promote disability inclusion, there remains a gap in implementation and compliance. Advocates continue to push for greater consideration and inclusion of people with disabilities in all aspects of life, particularly in financial decision-making, to achieve sustainable development goals and ensure that no one is left behind.

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