This is unfair - Digital lenders push back against proposed 20% tax in Finance Bill 2023

June 7th 2023, 3:42:54 pm
Digital Financial Services Association of Kenya (DFSAK) Chairperson Kevin Mutiso
  • Digital Credit Providers have warned that Kenyans may start receiving Sh940 and paying back Sh1,200 for every Sh1,000 borrowed, should Finance Bill 2023 be passed by MPs.
  • Under the bill, digital lenders will from July 1, 2023 be required to pay 20% excise duty on their loan interest as well as on their fees.
  • DFSAK has described the proposed changes as “discriminatory” and unfair. 

The Digital Financial Services Association of Kenya (DFSAK) has raised concerns over a proposed 20% duty to be imposed on digital loans customers, should Finance Bill 2023 be passed.

“The most affected are going to be informal sector entrepreneurs; mama mbogas, boda boda riders, traders, micro and small enterprises - Kenyans who weren't able to get loans from banks a few years ago.

"Over 8 million Kenyans who rely on our loans every month are going to be negatively affected,” DFSAK chairman Kevin Mutiso stated in a dispatch to newsrooms.

In submissions to the Finance Committee of the National Assembly, the digital lenders called for a level playing field that ensures all financial institutions face the same cost of credit.


The lenders seek to have either all financial institutions compelled to also pay the same tax as Digital Credit Providers (DCPs), or that the tax is removed and all lenders continue being subject to the current tax regime where interest and returns on loans are exempt from excise duty.

Presently, lenders charge between 20% and 30% interest on 30-day digital loans, based on the perceived risk profile of the borrower.

If the 20% excise duty is applied, for a Sh1,000 loan an excise duty of between Sh40 and Sh60 will be applicable. The charge will fall on borrowers, in addition to interest charges for the loan calculated at about Sh200 per Sh1,000 borrowed.


In the end, borrowers will receive about Sh940 for every Sh1,000 borrowed and in return pay back Sh1,200.

DFSAK has described the proposed changes as “discriminatory” given that only the prices of loans offered by DCPs are going to rise directly as a result of this additional tax, while other financial institutions will not have to bear similar costs.

The chair emphasised: "A fair playing field, we just want to pay the same taxes as everyone else. This is the same product, same channel, same tools being used to do credit scoring and KYC verification. The only difference is the entity that’s issuing. That’s not fair."

The proposed tax will apply to some digital loans (DCPs), but not those offered by commercial banks such as M-Shwari, KCB-MPesa and the Fuliza overdraft service.


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