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Kenya Bankers Association (KBA) has warned of a massive exodus from the formal banking systems if the Finance Bill 2024 is implemented without amendments.

Speaking on a local TV station on Tuesday, May 28, 2024, KBA Chief Executive Office Raimond Molenje noted that the proposals contained in the Bill will limit bank transactions.

Molenje argued that the Bill seeks to increase the exercise duty from 15 per cent to 20 per cent which will further raise the transactions fees.

He added that the situation will be worsened by the Value Added Tax (VAT). According to Molenje, the new tax proposals would raise the transaction fees by 25 per cent.

“There is a 25 per cent increase and this just makes transactions very difficult and unfortunately people are forced to move out of the formal banks and mobile bankings,” Molenje stated.

Raimond Molenje: Financial inclusion means individuals and businesses being able to access financial services easily, affordably and with dignity. Moving back to transacting in cash, outside the formal financial system, claws back the gains that have been made. #CitizenExplainer pic.twitter.com/u4oHHsfXvQ

— Kenya Bankers Association (KBA) (@KenyaBankers) May 28, 2024

Repercussion of shunning banks

With the expected massive exodus from formal financial institutions, Molenje raised fears that Kenya would turn into a cash economy.

According to Molenje, the implications of a cash economy include limited access to loans from both lenders.

“When they move out of the formal transactions, they will not be able to access the banks and digital loans,” Molenje asserted.

Further, he warned that businesspeople will start leaving in fear of losing their money due to the cash accumulated in their sales.

To avert the outcome, the Kenya Bankers Association appealed to President William Ruto’s administration to slow down some tax measures.

Kenya Kwanza assurance on tax proposals

The Departmental Committee on Finance and National Planning has assured stakeholders that it will scrutinize all the provisions contained in the Finance Bill, 2024, before enacting the legislative proposal into law.

Speaking during the first day of public hearings on the Bill, Committee Chairperson Kimani Kuria (Molo) assured the stakeholders that the Committee was keen to review the impact of the Finance Act, 2023, so that it can inform members’ decisions on the provisions in the current Bill.

“I want you to have a look at the Finance Act of 2024 when it is finally enacted, and compare it with the current Bill that we’re considering, and see the difference. We are keen to realise a progressive law that will help claw back economic growth,” Kimani assured.

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