Category: Business Daily

The prices of several models of imported second-hand vehicles have risen as high as Sh429,000 due to the controversial computation of import duty, hitting buyers who are now forced to dig deeper into their pockets.

For example, the cost of a Honda Insight 2019 model with a 1500cc engine has jumped to Sh2.6 million from an average of Sh2.2 million, after its duty charge rose to Sh791,000 from Sh362,000.

A 2019 model of the 1200cc electric Nissan Note is now going for an average of Sh1.4 million from Sh1.15 million, after taxes on the unit rose by Sh210,000 to Sh448,000.

Dealers say that new taxes that the Kenya Revenue Authority (KRA) is charging are clouded in secrecy, adding that most of the affected vehicles are not captured in the vehicle price list published in 2019, and which forms the basis of computing taxes for imported used vehicles.

The surge in duties has hit buyers and dealers, triggering slow sales.

The contested computation of the taxes comes at a time when KRA is barred from enforcing the new list that forms the basis of computing taxes (Current Retail Selling Price).

‘You bring a vehicle like a 1000cc Toyota Passo expecting to pay duty of Sh220,000, but then KRA tells you that it is Sh282,000. The small engine models, whose popularity is fast rising, are the most affected,’ Charles Munyori, Secretary General of industry lobby, Kenya Auto Bazaar Association, said.

Most of the affected cars have, over the years, become popular, especially among ride-hailing operators like Uber and Bolt, and the middle class, largely due to their affordability and small engines.

The price of a Toyota Raize 2019 model, with a 1000cc engine, has jumped to an average of Sh2.65 million from Sh2.35 million, mirroring the Sh245,000 rise in duty to Sh518,000.

Duty on an imported used Nissan Dayz 2019 model with an engine of 660cc has jumped by Sh92,000 to Sh247,000, pushing its car-yard price to an average of Sh980,000 from Sh850,000.

‘If a car model is not in the CRSP of 2029, then KRA is mainly using the manufacturer’s retail price in the source market. This has the impact of significantly increasing prices of the cars whose prices went up in the country of origin,’ added another dealer who sought anonymity.

KRA had not responded to queries on the matter, which has since sparked uproar as dealers grappled with reduced orders and increased costs of doing business.

The High Court last year barred KRA from enforcing a new CRSP until the hearing and determination of a case where dealers sued the taxman for lack of sufficient public participation in coming up with the new CRSP.

The new CRSP was to take effect from July 1, 2025, and would have seen prices of some imported used vehicles jump by upwards of 145 percent.

KRA charges five taxes on imported second-hand vehicles. These are import duty of 35 percent, excise duty of between 20-35 percent based on the engine size, and Value Added Tax of 16 percent.

The units also attract an Import declaration fee of 2.5 percent of the customs value and a railway development levy of two percent of the customs value in each case.

The uncertainty arising from disruptions in the flow of goods through the Strait of Hormuz has finally reached Kenya in the form of ‘tail risks.’ Although we all quietly expected it, the announcement of a sharp rise in fuel prices mid this month has still come as a shock.

Economists describe the current situation as a ‘tail risk’ because most models did not anticipate that the blockage of such a narrow waterway would occur, or, if it did, that it would have such far-reaching consequences for global supply chains and financial markets.

Before this war began, few people were familiar with terms like ‘Strait’ or ‘Hormuz.’ Today, phrases such as ‘blocking of the Strait of Hormuz’ have become part of everyday conversation.

Just this week, I overheard someone jokingly threaten to block another person’s ‘Strait of Hormuz.’ I did not follow up to understand what they meant, but the reference itself reflects how quickly global events have entered local discourse.

Beyond the terminology, what we will feel most are the economic consequences arising from the current situation. While the transmission of this shock was initially delayed by the Energy and Petroleum Regulatory Authority (Epra) statutory pricing regime, fuel costs have now caught up with global market prices.

For other cost-areas outside Epra, the effects of this tail risk now have no ‘delayer’.

Transport costs are expected to quickly rise, increasing the cost of moving goods across the country. Manufacturers and farmers, facing higher transport and production expenses, will pass these costs on to consumers.

Ultimately, the costs of goods in supermarket shelves will shortly increase. The result is broad-based, persistent, and systemic cost-push inflation.

In the real economy, consider large corporates with sufficient capital buffers in sectors such as transport, logistics, agriculture, and manufacturing, but which heavily dependent on fuel.

Even if they initially resist raising prices, increased operating costs will quickly erode profitability and capital, potentially pushing them out of business. The rational response, regardless of firm size, is to adjust prices accordingly.

Unlike demand-push inflation, which can be managed through interest rate adjustments, cost-push inflation creates a difficult trade-off between controlling inflation and supporting economic growth.

Raising interest rates may help stabilise prices but risks slowing growth by making borrowing more expensive. Conversely, keeping rates low may support growth but risks weakening the currency and amplifying imported inflation.

On the exchange rate front, higher oil prices have increased Kenya’s import bill, widening the current account deficit. This continues to put downward pressure on the Kenyan shilling. A weaker currency, in turn, makes imports more expensive, reinforcing inflationary pressures.

Rising fuel and food prices are also eroding household disposable income, forcing consumers to prioritise essential spending. As incomes shrink, less money is available for loan repayments. Micro, small, and medium enterprises, particularly those in non-essential sectors, are likely to be among the hardest hit due to declining sales.

As prices rise across the board, demand will likely decline. Reduced demand leads to lower output, delayed investments, and eventually layoffs. Job losses then hitback and reduce household income, further increasing credit risk across the economy.

As incomes fall, borrowers’ credit profiles deteriorate, increasing their probability of default. Under risk-based pricing frameworks, this leads to higher interest rates, which in turn raise loan repayment burdens and further strain household and business finances.

Lenders, facing elevated credit risk, will need to increase provisions, limiting their capacity to extend additional credit to the market.

This is how a geopolitical conflict thousands of kilometres away ultimately imports risks which eventually affects everyone.

Are there other tail risks ahead? No one knows. What is clear, however, is that the impact of Strait of Hormuz disruption on inflation, and the resulting pressure on the broader financial system requires urgent attention.

Motorists are grappling with an inconsistent supply of fuel in the wake of smaller cargo deliveries at the Mombasa port and cash-flow woes facing oil marketers.

A spot-check in Nairobi revealed that several retail outlets owned by majors such as Vivo Energy and Rubis Energie Kenya have been grappling with stock-outs over the past week, with diesel being the most affected.

Oil executives say that smaller cargoes, mainly of diesel since last month have forced oil marketers to share smaller volumes of fuel, reducing the number of days the stocks can last before the next shipment.

For example, diesel cargoes of between 85,000 tonnes and 100,000 tonnes are traditionally delivered at the port of Mombasa. But disruptions due to the US-Israel war on Iran have forced the country to ship in products using smaller vessels, some with a capacity as low as 37,000 tonnes.

‘Most of us do not have enough product. We normally receive big vessels for diesel, but the Middle East disruptions in the global market have forced us to get smaller ones. These hitches will persist up to around early next month when hopefully, the big vessels will come,’ said one of the executives.

‘Our cargoes for diesel are traditionally big, like 85,000 tonnes, but now we are getting vessels of 37,000 tonnes. These small vessels cannot meet our needs, and we are in a situation where much of these are going straight to the pump.’

The war, which broke out in February this year, disrupted global fuel supply chains notably through the closure of the critical Strait of Hormuz and attacks on refineries in the Gulf region.

Besides smaller cargoes, a steep subsidy of Sh23.92 and Sh108.10 per litre of diesel and kerosene, respectively, applied in the monthly cycle ending May 14, 2026, means that marketers have to wait longer for the Sh6.2 billion compensation further hurting their cash flows.

Most oil marketers started experiencing supply hitches early last month after a vessel carrying petrol was stranded at the Port of Jebel Ali in Dubai due to Iran’s blockade of the Strait of Hormuz.

The ship carried 60,000 tonnes, and its inability to deliver the product in Mombasa forced Kenya to seek alternatives to plug the gap and avert a crisis.

‘Vivo Energy has been operating at very thin PMS (petrol) stock (hand to mouth). Due to the current supply uncertainty, we have experienced increased uplift from our retail sites, which has made the situation worse,’ Vivo Energy CEO, Peter Murungi, had said in a letter to the Ministry of Energy Petroleum on March 12, 2026.

Another executive said the big companies are now pushing most of the product to their retail outlets and reducing the volumes available for the small independents in the wholesale market.

Additionally, costly fuel means that most of the dealers for the big marketers are getting less volumes for the same amount of money (credit limits). These stocks last fewer days, and delays in getting fresh deliveries trigger the inconsistent supply.

‘Due to the higher prices of the product, big marketers would rather push more product to their retail stations instead of selling in the wholesale market and waiting for the government subsidy,’ said the executive.

Sources in the industry say big oil marketers have shunned small independent firms and pushed much of their product to their retail outlets in a bid to ease the impact of the subsidy.

Small independent firms own most of the retail outlets outside the major cities, and buy their fuel from the oil majors at subsidised wholesale prices.

Several dealers, contracted by oil majors have also been hit, given that the costly fuel translates to reduced volumes based on their credit limits.

‘Most of the majors operate via the dealership model, and these dealers have credit limits. For example, a dealer with a credit limit of Sh10 million worth of fuel will now get less product because the prices have gone up, but the credit limit is unchanged,’ said an executive.

The cost of fuel that was imported into the country last month was significantly high, pushing oil marketers to spend more to get the product. This has been exacerbated by the steep subsidy that the government has yet to pay them.

Average landed cost (price of product and transport costs) of kerosene skyrocketed by 105.15 percent to $1,311.93 (Sh170,655.85) per cubic metre last month, while a similar quantity of diesel jumped by 68.72 percent to $1,073.82 (Sh139,682.50).

The cost of petrol went up by 41.53 percent to $823.87 (Sh107,169) per cubic metre last month, underscoring the impact of the US-Iran war on global markets.

The Middle East conflict has put pressure on Kenya’s fuel importation structures, forcing the government to seek emergency supplies to avert a crisis.

Kenya imports fuel under a government-backed deal with Saudi Aramco Trading Fujairah, Abu Dhabi’s ADNOC Global Trading Ltd, and Emirates National Oil Company Singapore Ltd.

The fuel is imported on a credit period of 180 days. The three oil majors handpicked a number of local oil marketers to ship the fuel on behalf of the country.

During a recent forum, the CEO of the Retirement Benefits Authority, Charles Machira, set out a clear direction for the pensions industry.

He highlighted priorities that will shape the next phase: innovation with safeguards, expanding coverage, using pension funds to support economic growth, and improving outcomes for members. At the centre of this shift are trustees.

These priorities come at a time when pension assets stand at nearly Sh2.81 trillion. But growth alone is not success when the coverage gap remains Kenya’s biggest challenge. Only about a quarter of Kenya’s workforce is covered by a pension scheme, leaving the majority without structured retirement savings, especially in the informal sector, which accounts for over 80 percent of employment.

This is where the next phase of the sector must focus: expanding access while improving outcomes. Kenya has already shown how innovation can expand access. Mobile money transformed financial inclusion. Today, micro-pension products and digital platforms are extending retirement savings to informal sector workers such as boda boda riders, traders, and small business owners.

But as we adopt innovation, it must be practical. Trustees must ensure these products are simple, affordable, and built for long-term savings. Without this, adoption will remain low.

As coverage expands, the question of returns becomes crucial. Today, pension portfolios remain heavily weighted toward traditional assets. Over 90 percent of funds are still invested in government securities, equities, guaranteed funds, and property. Government securities alone account for more than half of total assets.

While this has provided stability, it also limits growth. Encouragingly, there is a gradual shift. Allocations to private equity, corporate bonds, and other alternative assets are increasing, offering the potential for stronger long-term returns.

This is where trustees play a decisive role to strike the right balance between stability and growth. Too much conservatism erodes value over time, especially in an inflationary environment. Poorly assessed risk, on the other hand, can lead to losses.

The third priority is that as pension funds serve members, they must also serve the economy. Kenya faces an annual infrastructure financing gap exceeding Sh330 billion, pension funds have the assets. We are already seeing pension capital financing infrastructure, real estate, and businesses that create jobs. These investments are shaping Kenya’s development while generating returns for members.

But they must be approached carefully. Trustees must ensure that every allocation is justified, well-structured, and aligned to long-term obligations. The goal is not to follow trends, but to make decisions that improve outcomes for members.

Ultimately, the purpose of a pension system is to provide security in retirement. For many Kenyans, the biggest risks are rising healthcare costs and longer life expectancy. Savings that appear adequate can quickly diminish. Solutions such as post-retirement medical funds and more flexible savings structures are therefore critical, but only if they are well implemented.

Trustees must move beyond a compliance-driven approach and take full responsibility for member outcomes.

It is no longer sufficient to meet regulatory requirements; they must ensure that members are saving enough and that investments deliver consistent performance over time.

This calls for stronger capability, active oversight, and the confidence to challenge decisions to ensure products remain relevant and risks are effectively managed.

The next phase of the pension sector will be defined by whether trustees can expand access, invest more strategically, and focus on delivering meaningful retirement outcomes. Their actions will determine whether the sector fulfills its promise or leaves many Kenyans without adequate support in retirement.

Kenya will buy an additional $25 million (Sh3.23 billion) stake in Africa Finance Corporation (AFC) as the infrastructure development-focused multilateral institution moves to set up its first office outside Nigeria in Nairobi.

President William Ruto said on Wednesday during ongoing ‘The Africa we Build Summit 2026’ in Nairobi, the investment is part of Kenya’s move to continue strengthening regional development finance institutions.

Kenya has been one of the shareholders in AFC since 2017.

The pledge for additional equity came as AFC president and CEO Samaila Zubairu announced that the firm was going to set up a regional office in Nairobi. This will be AFC’s first office outside its headquarters in Lagos.

‘I want to inform AFC fraternity that as you set up office in Nairobi, the Kenya government is going to enhance its equity by $25 million as a demonstration of the confidence we have in African financial institutions,’ said Dr Ruto.

Mr Zubairu, who said AFC reached the agreement with Kenya officials to set up Nairobi office, explained that the office will be the first one outside Nigeria and aims to ride on opportunities in the East African region.

‘This is strategic. Nairobi sits at the heart of a region where trade capital, energy and industrial opportunity are increasingly interconnected. Establishing a presence here will allow us to work more closely with East African governments and partners who are moving from plans to projects and from commitment to capital,’ said Mr Zubairu.

‘It allows us to support what comes next- integrated corridors, regional energy platforms, industrial ecosystems, pipelines and domestic capital mobilisation at scale.’

AFC was created to help Africa nations plug infrastructure gaps via financing. Global shocks and geopolitical shifts have made it harder for African nations to raise funds for development abroad, making it imperative states can draw on internal capital.

But that is not happening enough, according to the AFC’s annual study, the State of Africa’s Infrastructure Report published on Thursday at the start of a two-day meeting in Nairobi.

The talks will try to achieve deals for infrastructure projects in Africa.

Mr Zubairu said domestic funds focused too much on low-risk assets such as government bonds that do not fully translate into productive investments. The need was to invest in infrastructure, which creates jobs and can have wider economic benefits.

“The Africa of will not be shaped by hope alone. It will be shaped by what we build,” he said.

Kenya’s planned fresh equity in AFC follows a similar move in the likes of African Export-Import Bank (Afreximbank), African Development Bank (AfDB) and African Trade and Investment Development Insurance (Atidi) and Trade and Development Bank (TDB) where the country has been increasing its equity.

In 2023, Kenya raised its stake in TDB by about $40 million (Sh5.17 billion), making it among the countries with highest stake in the Bujumbura-based institution. President Ruto said he has held talks with TDB for further injection.

‘We have already discussed how Kenya, being among the highest shareholders of TDB, is going to enhance our equity and shareholding. We are doing it intentionally and deliberately. We will continue as leaders in this continent to continue building our own Africa financial institutions and give them capacity,’ said President Ruto.

AFC has over 47 shareholders including sovereigns, pension funds, banks, and multilaterals across Africa. Since the start of the equity raise in 2018, the corporation has cumulatively mobilised over $1.1 billion (Sh142.1 billion).

The corporation plans to further diversify its shareholding by attracting investment from regional and non-regional institutional investors and double its current capital size to accelerate Africa’s infrastructure development and economic growth.

Technology firm Craft Silicon is best known for the taxi hailing provider, Little, which is locked in market share fight with giants-Uber and Bolt.

But behind the scene, the firm is cutting multi-million shilling deals in the sale of banking software and digital payment solutions in over 30 countries across Africa and Asia.

The firm’s founder and CEO, Kamal Budhabhatti, sat down with the Business Daily to discuss Craft Silicon’s diversification, expansion and building a global tech business from Kenya.

Craft Silicon is in 30 markets across Africa and Asia. What is the company’s game plan when it comes to scaling internationally?

When it comes to smart payments, the adoption is more in Africa compared to several Asian countries where we operate, like India and Indonesia. It is an opportunity for us to have Kenya or even the East African region, where the people are more receptive to newer technology.

At the same time, some products, like Little, are capital-intensive. We are in Kenya, Uganda, Tanzania and Ethiopia. In any new market that we go into where the marketing cost of the product is very high, we wait until we become profitable before entering a new market.

Your products, such as Little Cab, came after other global technology firms like Uber and Bolt set up shop here, and more are entering the market. Do you see any threat in competing with giants, and what sets you apart?

Obviously, we will get stiff competition when the bigger players from outside come, but we have our own niche, and we have our own unique proposition to the market. That’s why we always survived and scaled up. We welcome them and are also now in a position to acquire some of them.

We understand the local market well, compared to a player coming from outside, in terms of pricing and costing. Our prices are much lower.

It is also about making our value proposition unique.

With Little, for instance, we went beyond corporate ride-hailing to logistics in 2022. We are the only player with an array of solutions from two-wheelers like boda-bodas, three-wheelers, all the way to the 40-wheeler large trucks and containers. Now, the logistics arm has picked up well and accounts for 30 percent of what our platform generates.

Companies regionally are diversifying to cut reliance on a single product line. With your new platform, why did you want to get into tourism, and what opportunity do you see?

It was borne out of a problem that tourists, including my relatives when they visit from India, face. Many places they would go to do not accept cards, and without local SIM cards, they end up either carrying cash or having me pay on their behalf.

If it is convenient for tourists to do the transaction, their spending will also go up. Going to a forex bureau, converting the cash and carrying around Sh50,000 is not easy. It is more convenient to tap and pay with a card, and it brings in the larger transaction volume, which also helps our economy to scale.

The plan is to roll out Tourist Tap here and enter Uganda, Tanzania and Ethiopia in the next three months, and before the end of the year, head to West Africa. We are evaluating markets outside Africa. We are targeting countries where mobile wallets are very pervasive and dominant, so South Africa, for example, would not be ideal because cards are everywhere, compared to Zimbabwe.

What would you want to see more of to create a more enabling environment for local technology firms to thrive?

Even though I feel that regulators are supporting the innovation, M-Pesa is still very dominant, which sometimes puts some innovations at risk, in that everything has to end up in M-Pesa. More players would help us to remain more innovative.

Do you think current rules in Kenya and across Africa support or hinder innovation in fintech?

I would personally vouch for regulators. They are doing an amazing job and are also very pro-innovation.

As an innovator, what have you learned from failure?

We have tried many products and failed many times, but I think our key strength is that we have remained very agile. I like fostering a company culture where we allow people to try out everything that they feel could be interesting. And if the product fails, then it’s okay. We figure out why or what made it fail and learn from there.

What do you want your legacy to be?

I want to ensure that I run several companies like Elon Musk. He has done so many companies. I want all the companies I run to be profitable and innovative, but I don’t have to be in their day-to-day operations.

My mantra has always been to remain innovative and continue delivering. I believe things will fall in place if you have the right product.

The Kenya Revenue Authority (KRA) has opened a crackdown on small traders who change mobile money paybill and till numbers to evade taxes, signalling a shift in the tax-man’s pursuit of the elusive informal sector.

Acting Commissioner-General Lilian Nyawanda said the authority has detected widespread cases of traders frequently switching payment channels to avoid leaving a consistent transaction trail.

The tactic, she warned, no longer shields the traders from scrutiny in the race to weed out tax evaders.

The KRA has previously sought to integrate its system with those of mobile phone operators’ financial platforms to catch those who do not pay tax on their incomes.

To track the transactions, the KRA is largely relying on the electronic tax invoice management system (eTIMS), where businesses supplied with good and services declare payments made to their suppliers via paybills and tills.

‘We’ve got that feedback (switching paybill and till numbers) and our teams have encountered that even in the field,’ Dr Nyawanda said in an interview, noting that KRA compliance officers have flagged the practice across the country.

The growing use of digital payments – particularly mobile money -has made it easier for the KRA to piece together transaction trails, even where traders attempt to disguise them by constantly changing tills or paybills.

The KRA says its systems track such activity by matching transactions across counterparties, since every mobile money payment involves both a sender and a receiver, creating a dual record that can be reconciled even when one party does not declare the income.

‘It’s very easy to see the transactions. If you’re a trader, there’s what you purchase and there’s what you sell. So your transactions somehow will be captured somewhere,’ Dr Nyawanda said. ‘Even if you change tills or paybills, somehow they’ll be captured because you are trading with someone.’

This implies that if you are a trader purchasing stock from a compliant wholesaler, the supplier will list your mobile money account or PIN as the recipient of the goods when filing returns. The KRA system will then capture the purchase record, and when the trader files a “Nil” return or fails to file, the system will flag the discrepancy between the known stock purchases and the declared sales revenue.

The move comes as the government steps up efforts to widen the tax base amid persistent revenue shortfalls, with focus on the informal sector, which is estimated to account for a significant share of economic activity that remains largely undertaxed.

Small traders have for years exploited gaps in enforcement by operating multiple mobile money tills or paybills, often registered under different names, to fragment their income streams and make it difficult for tax auditors to establish accurate turnover levels.

The crackdown underscores the KRA’s shift towards data-led enforcement, relying on transaction matching and system analytics to identify non-compliant taxpayers rather than traditional audits alone.

The tax authority is increasingly flagging individuals and businesses who are actively transacting, but remain outside the tax net as non-filers or declare little income despite high sales or purchase activity.

‘A transaction is not completed by one party, it has two parties,’ Dr Nyawanda said. ‘One party may file, another one may not. So there’s a way we can track from our own system.’

The authority says it is already sending targeted communication to such traders, notifying them that their transactions have been detected and urging them to regularise their tax status. The enforcement push comes against the backdrop of tightening compliance rules that are raising the stakes for businesses operating outside formal systems.

Under the law, businesses are required to present valid electronic invoices to claim expenses and reduce their taxable income. The absence of such documentation raises the tax burden for compliant firms, even where transactions are legitimate.

Small traders are required to navigate the eTIMS, enabling them to obtain compliant invoices from suppliers to deduct the cost of stock.

Where goods are sourced from suppliers with annual turnover below Sh5 million –who are not required to be on eTIMS — the burden shifts to the buyer, who must generate a buyer-initiated invoice through the KRA’s eCitizen platform to support expense claims.

This adds an extra administrative layer to the transactions, especially in informal supply chains where documentation is limited.

Early this month, the KRA rolled out awareness and sensitisation campaigns in Nairobi’s Eastleigh business hub-a key source of goods for traders countrywide-after identifying gaps in the adoption of eTIMS.

In a statement following a consultative meeting with the Eastleigh Business District Association on April 13, the taxman said many traders struggle to obtain the required invoices because ‘traders in Eastleigh receive cash payments’.

‘One of the big gaps we have seen is in terms of tax awareness,’ Dr Nyawanda said. ‘With deliberate and sustained taxpayer education and sensitisation, we can bring taxpayers on board so that they are aware that if you just paid your fair share of taxes, you don’t need to hide.’

Traders earning Sh5 million or more annually are required to register for Value Added Tax (VAT) at the standard rate of 16 percent, while those with annual sales between Sh1 million and Sh25 million are subject to a 1.5 percent turnover tax on gross sales.

The KRA says the turnover tax, being final, simplifies compliance by focusing on sales rather than profits, which are harder to verify.

The practice of using multiple mobile money tills and paybills has, nonetheless, complicated tax audits, forcing the taxman to rethink its compliance strategies.

‘Yes, it does complicate our work,’ Dr Nyawanda admitted. ‘But what this helps us with is to plan better and focus better and even retweak the approaches that we traditionally used to look for better ways to do things, including continually working on simplified solutions.’

The KRA has sought to allay concerns over data privacy amid increased reliance on digital transaction tracking, saying that existing laws already require businesses to issue eTIMS-compliant invoices and file returns. This, it says, provides legal basis for accessing transaction data.

The authority maintains that it is guided by principles of data governance, including data protection and minimisation, and only gathers the minimum information needed to assess tax obligations.

‘From a tax administration perspective, our interest is to just get minimal data for purposes of tax administration,’ the KRA said. ‘We have no interest in getting trade secrets.’

Private companies seeking a share of billions of shillings in global climate financing are set to face stricter scrutiny and longer approval timelines following guidelines freshly issued by the National Treasury.

The new framework governing access to the Green Climate Fund (GCF) introduces a rigorous, State-controlled approval process that all project proposals-whether public or private-should undergo before securing funding.

The GCF, headquartered in Korea, is a global financing mechanism that supports developing countries to cut greenhouse gas emissions and adapt to climate change by funding low-emission and climate-resilient projects across public and private sectors. Globally, the fund manages about $20 billion (Sh2.58 trillion).

Kenya has secured commitments of about $492 million (Sh63.52 billion) across multiple projects, including a Sh12.5 billion programme implemented with KCB Bank Kenya targeting green investments by small businesses and farmers in areas such as solar energy, clean cooking, and climate-smart agriculture.

For private sector players, who have increasingly positioned themselves as key drivers of renewable energy, carbon markets, and climate-smart agriculture, the rules signal a shift toward tighter oversight and higher entry thresholds.

‘The proposed project/programme should be aligned with national priorities, including the Vision 2030, National Climate Change Action Plan, National Adaptation Plan, Kenya’s NDC [Nationally Determined Contribution], GCF Country Programme and other relevant sectoral and County policies and plans,’ the Treasury states in the circular.

The thrust of the rules is a mandatory ‘No Objection Letter (NOL)’, issued by the National Treasury, without which no proposal can proceed to the GCF for consideration.

The process introduces a structured, multi-stage approval pipeline, beginning with concept submission, followed by technical review, inter-ministerial committee scrutiny, and possible resubmissions, thereby lengthening timelines before projects can reach the global fund.

‘The purpose of this no-objection procedure is to ensure consistency with national climate change strategies and plans and country-driven approaches and to provide for effective direct and indirect public and private sector financing by the Fund,’ the Treasury states. ‘A no-objection is a condition for approval of all funding proposals submitted to the GCF.’

The Treasury rules, which will potentially reshape how green investments are structured and financed in Kenya, have come at a time when GCF has designated Nairobi as a regional hub for its operations in eastern and southern Africa.

Catherine Koffman, director of the GCF Africa Region, said the establishment of a regional presence is part of a broader reform agenda aimed at improving efficiency and impact. ‘Being closer means problems can be dealt with as they come up, instead of going back and forth across continents,’ she said last month.

Despite the decentralisation, the GCF maintains that funding decisions remain country-driven, meaning governments, including Kenya, retain control over which projects are prioritised and submitted for financing.

The Treasury rules further require that foreign firms should also demonstrate that their projects deliver value that local institutions cannot achieve.

The guidelines push for stronger roles for domestic Direct Access Entities, requiring foreign-backed or multinational proposals to justify their participation and partner with local executing entities.

‘In order to empower Direct Access Entities (DAEs), the project/programmes proposed by International Accredited Entities (IAEs) or Regional Accredited Entities must demonstrate access to resources well beyond what the DAEs can access,’ the Treasury states in the circular. ‘For multi-country projects, Kenya shall consider participation in projects/programmes involving no more than seven participating countries, or in cases where the project demonstrates a clearly articulated value proposition to Kenya, evidenced by a significant allocation of the overall project value towards Kenya-specific investments.’

The Treasury has set a one-month window for committee review, but projects deemed misaligned can be rejected outright, with applicants given two months to revise and restart the process.

The circular underscores the stakes, warning that ‘if the NDA concludes that the Concept Note is not in line with Kenya’s priorities, the NDA [National Designated Authority] will notify the applicant that the application has been rejected’.

For private firms operating in fast-moving sectors such as renewable energy and carbon credits, these timelines could prove costly, especially where global funding cycles and investor expectations demand speed and predictability.

The guidelines also impose stricter due diligence requirements, including proof of co-financing, assessment of debt implications, and demonstration that projects do not duplicate existing initiatives. While these measures aim to improve efficiency and accountability in the use of climate funds, they also increase the documentation and structuring burden on private developers.

Broader structural shifts are changing investor behaviour, which suggests the evolution away from purely passive strategies.

‘Improved access to information has increased the level of investor sophistication. They are now keen on both short and long-term opportunities,’ Ken Gichinga, Chief economist at Mentoria Economics, says.

However, at the heart of the debate over trading versus long-term investing, Mr Gichinga says, is an individual’s capacity for risk and understanding of the market. ‘Much of this depends on the knowledge, acumen and risk profile of the investor. In many cases, the higher the risk, the higher the return. Investors who are just starting out are encouraged to pursue low-risk opportunities as they build their investment acumen.’

Beyond individual strategy, macroeconomic factors also often determine whether investors lean toward active trading or long-term positioning. ‘A change in the interest rate outlook dictates investment strategy. This is often determined by the inflation dynamics that can arise, for example, from geopolitical situations such as the current US/Israel-Iran war,’ Mr Gichinga says.

The implications of increased retail trading activity also extend to the structure and stability of the market itself, particularly in relation to the balance between domestic and foreign participation. ‘Increased retail trading increases the participation of domestic investors at the bourse, which provides more stability in comparison to foreign investment, which is prone to capital flight,’ the economist notes.

As technology continues to alter the financial landscape, Mr Gichinga sees a future where automation and human decision-making coexist rather than competing. ‘There shall be a place for both. Technology, particularly AI, can increase efficiency in identifying opportunities; however, human intervention is still needed to ensure the priority objectives are still in place.’

Global bank Citi expects renewed pressure on the Kenyan shilling as higher fuel prices create a wider current account deficit in the wake of the Iran war.

The global lender sees the new Middle East crisis as a test for the Central Bank of Kenya (CBK) which is tasked with minimizing extreme volatility on the exchange rate system as part of its policy.

Citi has suggested that the apex bank could allow the shilling to weaken as a shock absorber to the Iran crisis, a move which could cushion Kenyan exports by making local goods cheaper in international markets at a time when demand could be weakened as global growth slumps.

The Kenya shilling has remained stable despite heightened geopolitical risks with the CBK attributing the continued strength of the local unit to diversified foreign exchange inflows, increased coincidence in the economy and adequate foreign exchange reserves.

‘Theoretically, when 25 percent of your import bill is oil, your current account is going to widen, and you are going to have to see some pressure on your currency. This is going to be a big test,’ said David Cowan, Citi’s Chief African Economist.

Kenya’s current account balance which measures a country’s net trade in goods, services and earnings in addition to net transfer payments with the rest of the world worsened through February on account of a wider trade deficit where imports had grown faster than exports.

CBK has projected a wider current account deficit in 2026 at three percent of GDP in contrast to an estimate of 2.4 percent due to the impact of the conflict in the Middle East. A slower growth in remittance flows especially from Gulf Countries has also been blamed for the expected deterioration of the current account balance.

‘The projected wider current account deficit in 2026 reflects the direct impact of the US-Israel-Iran war on the goods balance via commodity prices, supply chain disruptions and reduced global demand and a higher oil import bill due to higher oil prices,’ CBK said.

CBK quoted the Kenya shilling at Sh129.04 against the US dollar at the close of trading last week as the exchange rate kept within the long-established narrow-bound trading range of Sh129 to Sh130.

Citi Bank says the local unit appears to have found its level as the economy demonstrates the wide availability of hard currency, reversing an FX crunch seen in 2023 and early 2024 but argues it’s difficult to establish whether the developments represent an economic equilibrium.

‘I think it’s quite difficult to understand where the Kenya shilling lies, but the reality is that on the ground in Nairobi, at this point, there are no FX shortages and there is ample liquidity in the FX market,’ added Mr. Cowan.

‘I however don’t think there are many gains to an African government allowing a large currency appreciation. I understand that there is a sentiment logic that you might want to shock the market somehow and show that an African currency is not a permanent depreciation bet, but I still wouldn’t have allowed it (the Kenya shilling) to come back to 130.’

The Kenya shilling hit a low Sh160.75 against the US dollar at the height of the FX crunch on January 30, 2024, when investor jitters on a potential sovereign default were at their peak.

The shilling would rally from mid-February 2024 after the CBK undertook an early buyback of Sh258 billion ($2 billion) Eurobond notes whose maturity in June of the same year had caused investor concerns.