Non-Payslip Taxpayers Face a Freeze on Bank Accounts Over Failure to Contribute to Housing Levy

In Summary

1. KRA is enforcing the 1.5% housing levy on informal sector workers, threatening bank account freezes and PIN deactivation for non-compliance. Businesses like salons, bars, and corner shops face inspections as the government seeks to boost collections.
2. With the Ksh301 billion IMF programme expiring in April, Kenya is negotiating a successor deal to manage economic pressures. 
3. Kenyan banks recorded a record Ksh262.3 billion in pre-tax profits in 2024, driven by high lending rates. However, private sector lending dropped 1.4%, the sharpest decline in 22 years. Lower rates in 2025 could squeeze future earnings.
4. KPMG warns that the new NSSF contribution model, which raises deductions for higher earners, will reduce disposable income and increase employer costs. While meant to boost retirement savings, it adds to other statutory deductions like SHIF and the housing levy.
5. Kenya is finalizing a Ksh452 million carbon credit deal with Suni Smart Energy, alongside regulatory reforms for a national carbon registry and revenue-sharing models. KenGen is also expanding its carbon credit sales, capitalizing on clean energy projects.
6. The NSE has seen a surge in small-cap stocks like TransCentury (+282%) and Home Afrika (+157%), driven by speculative trading. Analysts warn of risks, as many of these companies face liquidity challenges, while blue-chip stocks post modest gains.

The Kenya Revenue Authority (KRA) is intensifying efforts to enforce the 1.5% housing levy among informal sector workers, warning that defaulters risk having their bank accounts frozen and PINs blocked. While the levy has been deducted from salaried employees since July 2023, compliance among informal traders remains low. The Affordable Housing Board and KRA plan to crack down on non-compliant businesses, including bars, salons, and corner shops, by conducting on-site inspections. KRA has deployed paramilitary revenue service assistants to identify defaulters, with enforcement measures including PIN deactivation, asset seizures, and travel bans under the Tax Procedures Act. According to the BusinessDaily, the government argues that the levy is crucial for funding affordable housing, but many Kenyans view it as an added financial burden alongside other new taxes like the SHIF contribution.

In a report by The Standard, Kenya is seeking a new IMF programme as the current Ksh301 billion arrangement expires in April. Initially approved in 2021 under former President Uhuru Kenyatta, the programme supported post-pandemic recovery and debt management. With local revenues declining and economic pressures mounting, a successor deal could provide financial relief for the Kenya Kwanza government. However, IMF officials stress that fiscal discipline remains crucial. Concerns also mount over reduced foreign aid, especially after President Trump’s recent directive to halt all US assistance, including to Kenya.

Kenyan banks posted a record pre-tax profit of Ksh262.3 billion in 2024, driven by high lending rates and earnings from government securities. Despite the impressive profits, private sector lending contracted by 1.4%, marking the sharpest decline in 22 years as interest rates on loans soared past 25%. While banks are set to reward shareholders with generous dividends, pressure from the Central Bank of Kenya (CBK) to cut rates may impact future earnings. With interest rates expected to decline, banks could see reduced profitability, but lower deposit costs and released provisions for bad loans may offer some relief as per the Business Daily.

In a report by Capital Business, Global audit firm KPMG has raised concerns over the impact of the new NSSF contribution model on Kenyan workers and businesses, warning that it will lower disposable income and increase employer costs. Under the revised structure, contributions have shifted from a flat Ksh200 per month to a tiered system, with higher earners contributing up to Ksh8,640 monthly. While the changes aim to boost retirement savings, they add to existing statutory deductions like SHIF and the Affordable Housing Levy, further straining household budgets. The government insists the move enhances long-term financial security, but KPMG warns of immediate pressure on consumer spending and business operations.

Kenya is moving closer to monetizing a Ksh452 million carbon credit deal with Suni Smart Energy, following the completion of due diligence by the Treasury and the Environment Ministry. According to the Business Daily, the project, which aims to develop and trade jurisdictional carbon credits, awaits final approval. The government is also advancing regulations, including a national carbon registry and revenue-sharing models, to structure the growing carbon market. Meanwhile, KenGen is expanding its carbon credit sales with a new tender for 1.8 million CERs, following last year’s Ksh4.14 billion deal. The company is capitalizing on its clean energy projects, with its Olkaria geothermal plants leading the latest offering. Carbon trading has become a key revenue stream, with Kenya advancing regulations, including a National Carbon Registry, to tap into the growing market.

Small-cap stocks at the NSE are experiencing a surge in speculative trading, with firms like TransCentury (+282%), Home Afrika (+157%), and East Africa Cables (+148%) posting massive gains. While last year’s top gainers were driven by strong fundamentals and improved dividends, this year’s rally is fueled by investors chasing low-priced stocks—many of which have weak financials. According to the BusinessDaily, analysts warn that some of these companies have liquidity risks and governance issues, posing potential losses for speculators. Meanwhile, blue-chip stocks like Safaricom (+6.5%), Equity Group (+0.1%), and EABL (+4.7%) have recorded modest gains, partly due to foreign investor exits in January. Despite the risks, equities remain attractive as fixed-income returns decline.