The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG
Bulk payments through commercial banks fell by nearly seven per
cent or Sh154.6 billion in August compared to the previous month, data
from the Central Bank of Kenya (CBK) shows.
The
reduction in transactions came at a time of an increase in mobile money
transactions but also
uncertainty over a new Robin Hood tax supposed to have taken effect on July 1. The tax -- of a 0.05 per cent on bank transfers of Sh500,000 and above law -- is currently in limbo after bankers went to court to oppose it. Analysts point out that the performance of the economy as witnessed in poor corporate financial results, retrenchments and high unemployment have also contributed to depressed large cash transfers.
uncertainty over a new Robin Hood tax supposed to have taken effect on July 1. The tax -- of a 0.05 per cent on bank transfers of Sh500,000 and above law -- is currently in limbo after bankers went to court to oppose it. Analysts point out that the performance of the economy as witnessed in poor corporate financial results, retrenchments and high unemployment have also contributed to depressed large cash transfers.
Banks transferred Sh2.43 trillion in August compared to Sh2.58 trillion in July, the first reduction since March.
“Besides
uncertainty in the new law on cash transfers, the performance of the
economy hasn’t been very good. Again, people realise that you can still
transfer large sums through the mobile phone,” said Mercyline
Gatebi-Kyalo, a research analyst with Nairobi-based Kingdom Securities.
As
the RTGS transaction value fell in August, the amount transferred
through mobile money rose by five per cent to Sh348.91 billion compared
to the previous month.
The RTGS system moves bulk cash
amounting to Sh1 million and above following outlawing of such
transactions through cash and cheques.
Under RTGS,
real-time transfers are cleared and settled on a continuous basis as
banks accounts are credited or debited using reserves held with the CBK.
In
March, the amount stood at Sh2.24 trillion, hitting a peak in July. In
the months preceding March, the amounts stood at Sh2.23 trillion and
below.
The Kenya Bankers Association moved to court in October arguing
backdating the excise tax is unconstitutional. With the case still in
court, it means the tax can still not be applied.
Shortly
after the Treasury’s proposal, analysts said the excise tax was not
only a shift from the accepted norm of imposing it on consumption but
would also have an impact on the cost of financial services.
“While
the government will collect more revenue from this measure, it appears
to be a shift from the established and accepted norm of excise duty as a
tax on consumption.
“We expect the proposal to have an
incremental impact on the cost of financial services and perhaps dampen
the pace of investment,” PwC said in its analysis of Budget proposals.
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