24 banks risk collapse, 7,000 Kenyans could lose jobs if proposed new law passes

At least 24 banks risk a total shut down that will affect nearly 7,000 employees if the proposed increment of core capital from Ksh.1 billion to Ksh.10 billion in three years time is done.

This came up during a session where the Kenya Bankers Association (KBA) made submissions on the proposed business laws before the National Assembly’s Finance Committee.

The bankers warned against introducing additional taxes on financial transactions, stating that the effect will reflect on interest rates charged through loans.

They warned that the proposed increment of core capital for financial institutions will limit access to credit, stagnate the economy further, cause loss of employment, and reduce government revenue in taxes.

According to KBA, the core capital raise from Ksh.1 billion to Ksh.10 billion will directly affect 24 banks that require a total of Ksh.150 billion to meet the threshold.

Raymond Molenje, Acting KBA CEO, said: “We should not ignore the 24 banks' contribution to the real economic growth, employment creation and enhanced governance revenue.”

While presenting its memoranda to the National Assembly departmental committee, the association stated that 6,779 Kenyan employees will be affected, with an additional 627 rental premises subjected to closure if the proposal will pass.

“The abrupt increase in core capital will disrupt these banks contribution to enhanced financial inclusion, distort deposits mobilization and limit extension of loans,” stated Molenje.

However, the lenders are accused of cutting credit to the private sector particularly to MSMEs and SMEs as well as investing clients and investing in other asset classes such as lucrative government securities, for higher yields.

Other entities which participated in Wednesday's public hearings on the Tax Amendment Laws include Westminister and LexLinks Consultancy.