Impact of Kenya's 2024 Business Laws Amendment on industry

Kenya celebrated its 61st Independence Day with a significant milestone in the legislative realm, as President Uhuru Kenyatta recently assented to the 2024 Business Laws Amendment Bill. This bill aims to bolster the nation's financial and industrial sectors by introducing vital amendments to key acts such as the Banking Act, Central Bank of Kenya Act, and Microfinance Act. To delve deeper into the implications and ramifications of these legislative changes, Philip Mwangale, a Law & Governance Specialist at Gibbor Group Africa, shared his expert insights on CNBC Africa. Reflecting on Kenya's journey over the past six decades, Mwangale highlighted the remarkable progress witnessed in various segments of the financial sector, including banking, payments, capital markets, insurance, and pensions. He underscored the significant advancements made in the payment service system, attributing much of the sector's growth to the evolving political landscape. Mwangale emphasized the positive trajectory of Kenya's financial sector and the pivotal role played by regulatory reforms over the years. Turning the spotlight on the recently enacted business laws amendment, Mwangale delved into the key provisions of the legislation. One groundbreaking aspect of the bill is the restructuring of the banking system, with a phased increase in the co-capital requirements for banks and mortgage finance companies. By the end of 2024, the co-capital threshold is set to reach 1 billion, escalating to 10 billion by 2027. This move is poised to reshape the banking landscape, potentially leading to mergers, acquisitions, and the entry of foreign investors into the market. Mwangale outlined the broader regulatory measures encompassed in the legislation, particularly the enhanced oversight of non-deposit taking institutions by the Central Bank of Kenya. This regulatory expansion aims to safeguard the interests of both lenders and borrowers in a historically unregulated sector. The amendment seeks to impose stricter penalties on entities violating regulations, with the CBK empowered to revoke licenses in cases of non-compliance. Mwangale underscored the importance of consumer protection in debt collection practices, highlighting the need for transparency and ethical conduct in the microfinance sector. The amended Microfinance Act is set to introduce mechanisms ensuring fair debt collection practices and deterring predatory lending behaviors. Additionally, the revamped legislation around special economic zones and investment promotion is expected to catalyze industrial growth and attract large-scale investments. The amendments to the Special Economic Zones Act will empower the Special Economic Zones Authority to set investment thresholds and establish streamlined service centers for permit approvals. Tax incentives offered to zone developers aim to incentivize significant industrial investments, ultimately fostering a conducive environment for economic development. The centralized investment service hub introduced under the Investment Promotion Act will streamline foreign direct investment processes, albeit with potential bottlenecks that require iterative optimization. Mwangale concluded the discussion by highlighting the transformative impact of the 2024 Business Laws Amendment on Kenya's economic landscape, underscoring the government's commitment to fostering a resilient and dynamic financial ecosystem.