Financial Focus 2012

There have been a number of proposed changes in the regulatory and commercial environment affecting financial services industry in Kenya. In this year's Financial Focus, Richard Njoroge, PwC Kenya's Assurance Leader speaks about the proposed amendment to the Finance Act capping interest rates.

Many financial services organisations are concerned about the amendment’s potential impact, and Richard has various insightful things to say about it. New bad debt guidelines issued by the Kenya Revenue Authority in April will affect the tax relief that banks can claim for bad debts. The new guidelines will increase the amount of tax that banks pay in the short term and require banks to track each debt for tax relief purposes.

Bank interest rates in Kenya were raised significantly by the Central Bank of Kenya in response to an unprecedented weakening of the Kenya shilling and spiralling inflation. This move has in turn resulted in banks raising their interest rates to levels of 23% and above. 

The country had enjoyed a relatively low interest rate regime for some years and the current level of interest rates threatens to slow down economic growth. This has increased the clamour that has always been to control interest rates. An amendment to the Finance Bill has been proposed, capping interest rates to 4% above the central bank rate (CBR) and minimum interest rates on deposits to 70% of the CBR. The amendment has since held up passage of the Finance Bill, and has generated considerable debate and commentary.

Download our Financial Focus 2012 to get beyond the rhetoric and understand the impact of the Finance Bill amendment in Kenya.