Category: Business Daily

Cash-strapped Kenya Broadcasting Corporation (KBC) has opened up nearly 2,000 acres of land across the country as part of a broader State strategy to generate revenue from idle public assets.

Official disclosures show that the State agency has listed 1,909.9 acres for long-term leases to investors for farming and other temporary business ventures, as it seeks to boost revenue and reverse its dire financial position, marked by cash flow challenges and debt projected at about Sh90 billion.

The land on offer includes 1,234 acres in Donyo Sabuk Komarock, Marania transmission site (146.5 acres), Maralal (200 acres), Kitale (200 acres), Nyamninia transmission site (100 acres), Kapsimotwa (29 acres), and Sauti House Mombasa (0.4 acres).

‘This will secure the remaining property and avoid further illegal encroachment, invasion, and land-grabbing attempts. To further utilise the space and put the land into economic use instead of leaving it lying idle. The government has further directed parastatals to look into ways of generating their own income instead of relying on the exchequer for funding. This, therefore, calls for better utilisation of the land for income generation,’ KBC said.

The leases form part of the State’s Land Commercialisation Initiative (LCI), which aims to lease up to 500,000 acres of idle land and attract at least Sh65 billion in agricultural investments.

The initiative targets a reduction in the staple food deficit by at least 50 percent, creation of 1.1 million jobs, higher farmer incomes and increased value addition.

Other public land identified for the LCI includes 200 acres at Egerton University set aside for an agro-science park, 10,000 acres at the Galana Kulalu irrigation scheme, and 25,000 acres at the Bura irrigation scheme.

Additionally, the Tana Delta Irrigation Project has 10,000 acres earmarked for rice production, while Kiambere in Embu County has 1,000 acres for fruit and vegetable farming.

Lease push

The State has also offered 21-year renewable leases to investors for 25,000 acres within the Bura irrigation scheme for commercial sugarcane production, as part of the wider push to monetise idle public land.

The Bura scheme spans 296,000 acres, of which 12,000 acres have been developed and 6,000 acres are currently under production for rice and maize.

The National Irrigation Authority (NIA) said it has opened up 25,000 acres for sugarcane farming under lease arrangements.

A work plan released by the NIA in June 2025 shows the government plans to allocate 45,000 acres in the Bura scheme to rice farming and 50,000 acres to sugarcane, while maize, pasture and fodder crops will occupy 10,000 acres.

Under the partnership model, the government will provide bulk irrigation water from the main canal, while lessees will be responsible for on-farm distribution, land preparation and infrastructure development.

The Agriculture and Livestock Ministry has also opened up 21,000 acres of idle land belonging to the National Youth Service (NYS) and the Tana and Athi Rivers Development Authority (Tarda) for commercial leases to boost food security.

The State plans to lease 20,000 acres within the Samburu Kirimun field unit held by NYS, currently used for livestock production, wildlife conservancy and tree plantations. An additional 1,000 acres held by Tarda near the Kiambere hydropower dam is also available.

Cash-strapped Moi University has also opened up 1,500 acres at its main Kesses campus in Eldoret for farming leases. The university said investors will take up the land for 60 months, mainly for maize farming.

The International Monetary Fund (IMF) has cut Kenya’s growth forecast for 2026 to 4.5 percent from 4.9 percent, citing rising energy costs, risks to remittances and export disruptions linked to the war in the Middle East.

Kenya’s revised outlook comes as the IMF also lowered its global growth forecast to 3.1 percent from 3.3 percent, reflecting mounting geopolitical and economic headwinds.

The downgrade is likely to weigh on job creation, especially as the latest official data shows the economy added the fewest jobs since the 2020 coronavirus pandemic.

The IMF also expects inflation to accelerate faster than previously projected, with consumer prices now seen closing the year at 5.9 percent, up from an earlier estimate of 5.2 percent.

The projected slowdown is expected to stem from reduced productivity as firms grapple with rising input costs, including fuel and fertiliser.

Higher inflation is also set to erode household purchasing power, forcing consumers to cut spending and weakening demand, which could limit hiring and increase the risk of layoffs.

The Washington DC-based lender warned that the ongoing US-Israel war with Iran could derail the global recovery.

‘Once again, the global economy is threatened with being thrown off course – this time by the outbreak of war in the Middle East at the end of February 2026,’ the IMF said in its World Economic Outlook report published earlier this week.

‘Over the past year, headwinds from higher trade barriers and elevated uncertainty have been offset by tailwinds from technology-related investment, accommodative financial conditions, including a weaker US dollar, and fiscal and monetary policy support. The Middle East conflict presents a significant counterforce to these tailwinds through its impact on commodity markets, inflation expectations and financial conditions.’

More downgrades

The World Bank has also lowered Kenya’s growth projection for 2026 to 4.4 percent from 4.9 percent, citing mounting external pressures and structural constraints linked to the conflict.

It noted that while macroeconomic stability has improved in many countries, supported by easing inflation, stronger currencies and better fiscal management, these gains are now being tested by external shocks, particularly from the escalating US-Israel conflict with Iran.

‘The conflict has heightened risks to remittance flows, threatening an essential income source for countries such as Kenya, which could face monthly losses of up to $40 million (Sh5.2 billion),’ the World Bank said.

Global ratings agency Fitch has also trimmed Kenya’s 2026 growth forecast to five percent from 5.2 percent, citing inflationary pressures linked to the conflict.

In 2024, the economy created 782,300 jobs, down from 848,100 a year earlier, according to official data.

About 90 percent of these jobs were in the informal sector, highlighting the challenges facing formal businesses in creating quality employment for graduates entering the labour market.

The economy generated 75,000 formal jobs last year, compared with 122,900 previously – another low since the Covid-19 downturn, when 185,800 jobs were lost in 2020.

Policy outlook

The Central Bank of Kenya (CBK) has also cut its 2026 growth forecast to 5.3 percent from 5.5 percent, reflecting emerging risks from the Middle East conflict.

‘Higher energy prices attributed to the war in Iran are expected to affect the performance of key sectors such as manufacturing, transport and storage, accommodation and food services, and wholesale and retail trade,’ CBK Governor Kamau Thugge said.

‘Disruptions in supply chains are also expected to affect exports and imports of goods and services.’

However, CBK expects the manufacturing sector to grow by three percent in 2026, up from a projected 2.2 percent in 2025.

Growth in transport and storage, as well as accommodation and food services, is expected to slow to 4.3 percent from 4.9 percent and to eight percent from 10.4 percent, respectively.

The agriculture sector is expected to provide some support, aided by favourable weather conditions, while services are likely to remain resilient on the back of continued digitisation and the expansion of e-commerce.

A walk through Circle Art Gallery feels like standing in the stillness of mountain echoes: Quiet, yet resonant. Within that stillness, the works of Issam Hafiez radiate a warmth that both comforts and unsettles.

Nubian Tar, as the exhibition is titled, is a body of work that demonstrates a masterful command of stroke, balance, form, pattern, and colour. Nothing is accidental. Every detail feels deliberate.

Hafiez has the rare ability to make complexity appear effortless. His work carries depth without intimidation, inviting the viewer in even as it layers meaning beneath the surface. It is art that speaks softly yet lingers loudly.

With prices ranging between Sh77,550 and Sh1.3 million, Nubian Tar stands among the more premium exhibitions on the local circuit.

Yet to measure Hafiez’s work purely in monetary terms would be to miss the point. His dedication, lived experience, and artistic precision elevate the collection beyond price, into something far more enduring.

Nubian Tar pays homage to people and landscapes of Hafiez’s youth; the Nubian culture of farmers along riverbanks of the Nile intertwining with the desert into Egypt, the houses on the hills and the highlands with their white facades and the gentle sway of palm trees which are emboldened onto the fabric of his memories and alternatively onto the delicate tip end of his brush strokes on canvas.

It plays to his strength of merging patterns, figures and faces into landscapes with almost unnerving ease. A Hafiez painting is detailed intricacy at play.

Nubian Tar has been a work in progress. For the past three years after Hafiez relocated to Kenya from Sudan because of the war, some of the paintings which were done before the war have had to be collected and shipped from Khartoum, Egypt and London to Nairobi.

It is an exhibition that offers different shades and perspectives of the Sudanese artist, from dull to grayscale to colourful presentations.

The stories presented in the pictures are narratives from his childhood and his observation of the world he grew up in before and after the war in Sudan.

‘It is kind of focused on our country and the experience of having war wounds. Everything on these paintings, especially those done in the past three years, are expressions of myself against the war and my reflections on this situation’, he says.

The expressions are not as direct as a poem a song or a hard prose would look like. Beneath the colours and shades is masked pain and hurt at the needlessness of unnecessary wars.

‘If you go through a war and you have to relocate and stay alone without family and community, living becomes hard. War has had me kicked from my home and all this has come out to express itself in the exhibition. It was very hard for me because this is the first time I am doing an exhibition away from my home, and not by my choice.’

Nubian Tar also traces the evolution of Hafiez’s palette. His earlier works carry the deep ochre tones of the Nubian desert; the ‘tar’ that grounds the exhibition’s title. But over time, his canvases begin to open up into lighter, more vibrant hues.

This shift, he explains, was almost unconscious.

‘My artwork has changed because I came out of a war,’ he says. ‘In Kenya, I draw from the peace around me – the people, the environment. Art helps me express myself in ways that words never could. This exhibition feels like a beginning, like saying: I am still here.’

For Hafiez, the show is also a cry for help for Sudanese art which he says has been negatively affected by the war.

‘The war is working negatively against art and culture in Sudan because during this period, we have seen a lot of heritage sites being destroyed. I need not always talk about war but war is what I have, that is my situation.’

Hafiez, who also doubles up as a photographer, observes from his travelling that Africa is collectively suffering.

His travels across Central Africa, Mali, Ethiopia recording wars have had him conclude that for the most part, the citizenry is innocent, and that the influx of uncontrolled weapons is the disease that needs purging because of the atrocities it has enabled. This purging, he believes, will brought about by art.

‘Art will bring a revolution to this continent. It will unite the African people. My messaging isn’t for Sudan only, we have chronic wars in many parts of Africa. We need to work more as artists to create movements that will revolutionise ideologies against war,’ he says.

Attorney General Dorcas Oduor has opposed a fresh petition by former Cabinet minister and Jubilee Party Secretary-General, Raphael Tuju, seeking to block a regional lender from auctioning his three properties in Karen, Nairobi, over a Sh1.9 billion debt.

Mr Tuju, in his petition, claims the East African Development Bank (EADB) is relying on sections of the law that were declared unconstitutional by the High Court in 2025.

EADB is primarily owned by four member States of the East Africa Community – Kenya, Tanzania, Rwanda and Uganda.

But in an objection filed in court, Attorney General argued that various courts had determined the matter and cannot be revisited.

Mr Tuju filed the petition last month, arguing that the EADB was relying on Sections 2(1) and (2) of the East African Development Bank Act to enforce an English court judgment and auction his properties, yet the provisions were declared unconstitutional.

The ex-minister’s properties caught in the debt row include Entim Sidai Wellness Sanctuary, Tamarind Karen, and Dari Business Park, assets used as collateral for a multi-million-dollar facility advanced to Dari Limited in 2015.

One of Mr Tuju’s properties, Dari Coffee and Garden Restaurant in Karen, was auctioned on October 1, 2024, for Sh450 million to Ultra Eureka Ltd – a company owned by Stabex International Ltd co-owner Jackson Kiplimo Chebett.

Mr Tuju submitted that the provisions unilaterally conferred on the Finance Cabinet Secretary, unchecked authority to charge and disburse public funds from the Consolidated Fund to EADB without parliamentary input or accountability.

However, the Attorney General maintained that the declaration of unconstitutionality of Sections 2(1) and (2) of the EADB Act relates strictly to financing of the bank by the Kenyan government and does not affect EADB’s lending powers, which are defined in its founding documents.

‘Thus, this petition is a last-ditch attempt to manoeuvre the court’s jurisdiction in a manner incompatible with the rule of law, the sanctity of contractual obligations, and the imperative of justice, and is therefore an abuse of the court process,’ the Attorney General said.

The State Law Office added that EADB obtained a judgment against Mr Tuju and Dari Ltd from the High Court of England and Wales on June 19, 2019, ordering them to pay $15,162,320.

Further, the High Court, in a recent ruling, affirmed that issues surrounding the 2015 loan agreement had already been determined by the courts and cannot be revisited.

The bank said the petition is time-barred and that the issues raised have already been determined by other courts.

The Kenya Bankers Association (KBA) has urged the High Court to suspend a circular by the Commissioner of Insurance, which banned service-based fees paid by insurance firms to the subsidiaries of commercial banks.

In submissions filed in the High Court, KBA argued that the circular effectively invalidates contractual agreements between bancassurance intermediaries and insurers concerning value-added services.

The circular issued on March 25, 2026, stated that any payments made to intermediaries, such as override commissions, administration fees, profit shares, or any similar payments exceeding the limits set under the Insurance Act, are illegal.

However, KBA, through its chief executive officer, Raimond Malonje, contends that the circular wrongly seeks to outlaw service-based fees for auxiliary services, which are separately contracted between insurers and bancassurance intermediaries.

The association pointed out that these fees are not regulated or governed by the Insurance Act or its regulations.

“The fees in question do not constitute brokerage fees or commissions, and as such, they are not prescribed under the Insurance Act or its related provisions,” KBA stated.

Furthermore, KBA questioned the regulator’s actions, pointing out that the Insurance Commissioner had not specified which regulated entities, including bancassurance intermediaries, were being monitored for compliance or found in violation of the Act.

In response, the Commissioner of Insurance, Godfrey Kiptum, opposed the application, arguing that the circular was issued to streamline practices and ensure that audited accounts were properly submitted.

He said an audit had revealed that some insurers were still paying commissions above the amounts prescribed under the Insurance Act.

“The circular provides that insurers should charge premium rates according to the manual filed with the Authority, and that any payments to intermediaries in the form of override commissions, administration fees, profit shares, or any other similar fees that exceed the prescribed limits under the Insurance Act are illegal. Premiums should be remitted to the insurer in full, not net of commissions,” Mr Kiptum said.

The commissioner warned that granting the conservatory order sought by KBA would expose policyholders’ funds to the risk of dissipation and policyholder interests.

Investors who bought the new 30-year Treasury bond were handed a nine percent discount on the price of the security after they demanded a higher interest return than what the State was willing to pay on the paper.

The bond came with a predetermined annual interest rate of 12.5 percent, but investors demanded to be paid 13.75 percent to buy the paper, hence the discount on the price to make up for the return shortfall.

The CBK said that successful bidders on the 30-year bond will pay Sh91.04 per bond unit of Sh100, effectively handing them a discount of Sh8.96 for each unit. A unit of a bond is priced at Sh100, but they can sell above or below this price depending on the prevailing demand when the papers are reopened.

The interest rate outlook has however shifted due to the threat of inflation due to the Iran war, with investors now anticipating higher returns in the near term if the CBK is forced to raise the base rate to fight higher inflation.

It also means that the cost of borrowing for government will go up due to the cash ceded in offering the discounts to investors.

For investors however, the lower prices are a direct upfront gain, considering that they will be paid interest and maturity settlements on the full face value of the bonds.

In the bonds market, interest rates and prices have an inverse relationship, where a fall in one results in an increase in the other.

Ideally, when the investor’s rate demands match what the government is willing to pay for a security, the buyer would pay exactly the face value of the security.

However, when investors ask for a return that is higher than a bond’s actual coupon or interest rate, the CBK offers a discount on the bond’s price to compensate the investors for accepting to earn below their desired return.

Alternatively, when investors indicate they are willing to take a return that is lower than a bond’s coupon rate, they end up paying a price premium to the CBK in order to secure the bond.

The CBK was thus forced to offer the price discount to attract buyers to its April issuance, which targeted Sh20 billion from the new bond and a reopened 30-year bond that was first sold in 2011 at an annual interest rate of 12 percent.

The issuance raised Sh30.06 billion from investor bids of Sh38 billion from the two bonds. The new 30-year bond netted Sh23.5 billion from offers worth Sh31.3 billion, while the reopened paper raised Sh6.6 billion from offers of Sh7.05 billion.

Similar to the new bond, the 2011 paper was also sold at a discount of Sh1.91 per unit of Sh100, after buyers demanded a return of 12.99 percent compared to its actual interest rate of 12.5 percent.

The government is collecting net of Sh27.82 billion from the two bonds, handing investors Sh2.24 billion in discounts on the papers.

President William Ruto’s abrupt reversal order on value-added tax (VAT) on fuel, triggered an overnight scramble among oil marketers seeking to reconfigure their systems, amid concerns about unpredictable policy shifts in the Kenyan business space.

The abrupt decision to halve VAT on petroleum products from 16 percent to 8 percent-announced late Wednesday and effected at midnight-offered immediate relief to motorists, but left firms grappling with operational and legal complexities after two days of shifting tax signals.

Super petrol in Nairobi fell by Sh9.37 to Sh197.60 a litre in the latest review by the Energy and Petroleum Regulatory Authority (Epra), while diesel declined by Sh10.21 to Sh196.63. The reductions came barely 24 hours after prices had surged past Sh206 per litre under a 13 percent VAT regime, itself a short-lived revision from the statutory 16 percent rate.

But behind the pump price relief lies a deeper disruption within the fuel supply chain, where companies have had to overhaul complex IT and accounting systems multiple times within days.

A former chief executive at a major oil marketing company said the rapid changes triggered a round-the-clock systems overhaul across the industry.

‘The issue of VAT [changes] is not just financial-it is an IT issue,’ the ex-senior official, with vast experience in the workings of the industry, told the Business Daily.

‘Teams have been working through the night to simulate changes, deploy them and confirm they are working across all branches. One CEO, who is a friend of mine, left the office at 5am,” the source added.

The disruption has been amplified by the integration of oil marketers’ systems with those of the Kenya Revenue Authority’s Electronic Tax Invoice Management System (eTIMS) fuel module, a reform designed to tighten compliance but now complicating rapid tax adjustments.

Tax experts say the sequencing of policy changes-from 16 percent to 13 percent and then to 8 percent within a narrow window-has strained both compliance systems and business planning assumptions.

Alex Kanyi, a tax partner at Cliffe Dekker Hofmeyr (CDH), said while firms had anticipated rising global oil prices, they had not expected such abrupt and repeated shifts in the VAT rate.

‘There is a process to how these systems are configured, especially after integration with KRA,’ Mr Kanyi said on the telephone.

‘They were aligned to 16 percent. Moving to 13 percent would already require reconfiguration, but before firms could fully adjust, the rate was again reduced to 8 percent.’

He added that the 8 percent rate, having existed previously, may be easier to implement technically than the interim 13 percent.

However, the quick succession of changes has introduced operational complexity, particularly for firms relying on external service providers to manage enterprise resource planning systems.

‘You have external providers who must come in to adjust these systems each time the rate changes, and that comes at a cost,’ Mr Kanyi said.

Smaller oil marketers are expected to bear the brunt of the disruption as they lack the financial and technical capacity of larger firms to quickly adapt to regulatory shocks.

Besides the operational challenges, the latest tax changes is also raising legal and policy questions about the consistency of Kenya’s fiscal framework.

Under the VAT Act, the National Treasury is empowered to vary the VAT rate within a defined band to enhance predictability for businesses. However, analysts note that the move to eight percent appears to stretch that framework, potentially undermining the very certainty the provision was designed to guarantee.

‘The law was meant to provide predictability by capping how far the rate could move,’ Mr Kanyi said. ‘But the way this has been implemented does not seem anchored on that predictability.’

The development underscores a broader tension between political responsiveness and policy stability, as the government moves to cushion consumers amid rising global oil prices and a high cost of living.

The abrupt VAT cut followed a public backlash after fuel prices hit record highs earlier this week, prompting swift intervention by the National Treasury through a legal notice issued by Treasury Cabinet Secretary John Mbadi.

While the temporary reduction is expected to ease inflationary pressure in the short term, particularly in transport and food prices, tax experts warn that frequent and abrupt tax changes risk distorting market signals and complicating long-term planning for businesses across sectors, from logistics to manufacturing.

Former top officials of the Airports Sacco have defaulted on Sh49.99 million loans tapped from the organisation, a report by the supervisory committee revealed, raising questions over the credit risk management of the institution.

The report on the sacco, whose core membership is drawn from Kenya Airports Authority (KAA) employees, shows that recovery efforts have yielded little progress, even as it flagged weaknesses in the management of outstanding loans worth Sh50.04 million borrowed by current staff.

For the loans tapped by ex-staff, no amount was recovered in the year ended December 2025.

The committee warned that continued delay in the recovery of the loans exposes the sacco to ‘significant financial loss and erosion of members’ funds.’

The report shows that a former chief executive allegedly defaulted on a Sh26.96 million loan, followed by a former treasurer (Sh9.36 million) and a former chairman (Sh2.44 million). Other former staff of the sacco, which started in March 1994, have defaulted on Sh11.21 million loans.

‘The loans remain largely unrecovered and continue to pose a significant credit risk to the society,’ notes the report.

The disclosures point to the insider lending risks for saccos, especially where senior officials award themselves loans beyond what their deposits allow.

A similar case to Airports Sacco played out at Kenya Union of Savings and Credit Co-operatives (Kuscco) where Sh192.8 million insider loans to senior officials formed part of the heist that left the umbrella body for saccos insolvent to the tune of Sh12.5 billion.

The report adds that Airports Sacco has reported the former officials to the Co-operative Tribunal to try to recover the amount. The committee has further recommended exploring additional legal and recovery mechanisms and providing periodic progress reports to members on the status of recovery efforts.

The report shows that the current staff has borrowed Sh50.04 million, with the loans performing and fully guaranteed.

However, the supervisory committee has observed that some staff have tapped loans with a maturity period beyond their retirement age or contractual period, raising fears of a future wave of defaults when they exit.

‘The supervisory committee further notes that some insider loan facilities extend beyond the retirement age of certain board members and staff, while others extend beyond the contractual employment period of some borrowers,’ notes the report.

The committee adds that while the loans are guaranteed and performing, the sacco’s board and management should strengthen credit risk management and loan structuring policies to ensure repayment periods are aligned with retirement age, employment tenure and borrowers’ repayment capacity.

It wants the credit policy reviewed to allow only well-secured members with demonstrated repayment capacity to access loans beyond retirement age.

The Sacco Societies Act allows saccos to grant loans to their employees and board members on condition that the terms are the same as those applied to members.

The rules bar the employees or directors from participating in the approval process or being guarantors.

‘No director, officer, employee, or member of the board of a sacco society shall act as a guarantor of any person with respect to a loan advanced or credit facility granted to a person by that society,’ reads the Act.

The Central Bank of Kenya (CBK) is forecasting inflation to hit the 6.2 percent mark in July, in the wake of costly fuel, further worsening workers’ purchasing power.

The banking regulator reckons that a prolonged conflict in the Middle East will push the cost-of-living measure to its highest level since February 2024.

The blockade of fuel in the Gulf following the US-Israeli war on Iran has seen pump prices hit record levels across the globe, with a litre of diesel jumping 24 percent to Sh206.97 in Kenya for the month to May 14.

This will put pressure on inflation and hurt workers’ purchasing power in an economy that has delivered negative real wages for five years in a row.

‘With the oil price shock and assuming that the conflict lasts for the next three months, the forecast overall inflation does go above the five percent mid-point, peaking in July 2026 after which it progressively declines,’ CBK Governor Kamau Thugge said last week ahead of Tuesday’s fuel price review.

The closure of the Strait of Hormuz, a narrow waterway in the Middle East through which up to one fifth of global fuel supplies passes, has disrupted oil supply chains, resulting in higher prices at the pump.

The aftermath of the record jump in fuel prices is set to push the inflation from 4.4 percent in March.

Fuel prices make a big contribution in Kenya as it relies heavily on diesel for transport, power generation and agriculture, while kerosene is used in many households for cooking and lighting.

The CBK expects inflation to rise above the targeted midpoint of five percent in coming months, peaking at 6.2 percent in July, if the war lasts to at least June.

Matatu operators on Wednesday reckoned that its members will increase fares by 25 percent following the spike in fuel prices.

‘Most matatus use diesel. We’ve consulted widely with our members and agreed on increasing fares by 25 percent,’ said Albert Karakacha, the chairman of the Matatu Owners Association.

Kenya targets an inflation rate of between 2.5 percent and 7.5 percent, which the government assesses as the most appropriate rate of change in prices to not only deliver economic growth but also contain a rise in consumer prices.

‘Overall inflation is expected to remain within the target range in the near term, and this would be supported by appropriate monetary policy actions, expected stability in food prices owing to favourable weather conditions and the continued stability of the exchange rate,’ Dr Thugge added.

Salary rises in 2024 lagged inflation for the fifth year in a row, weakening workers’ purchasing power and their standards of living.

Inflation-adjusted real wages in Kenya continued to drop after recording a decline of 0.3 percent last year as employers remain reluctant to offer bigger pay rises to cover for rising cost of commodities.

This is the fifth year in a row that workers have endured falling real wages, including a negative 4.1 percent in 2023.

The CBK’s March 2026 market perceptions survey and agriculture sector survey showed that inflation expectations will hold in the target range in coming months but noted upward pressure due to higher energy prices.

The apex bank paused its rate easing cycle for the first time in nearly two years, adopting a wait-and-see approach on where consumer prices move next.

The CBK deploys its interest rate setting mandate to counter inflationary pressures. Kenya’s benchmark interest rate fell from 13 percent in August 2024 to 8.75 percent at present, supported largely by a slowdown in the change of consumer prices and a stage exchange rate.

The Kenya shilling has continued to trade on a narrow-bound range against the US dollar, changing hands at between Sh129 and Sh130, even after the onset of the US-Israeli war on Iran at the start of March.

Premiums paid by banks toward the insurance of customer deposits will now factor risks linked to fluctuating interest rates, foreign exchange rates, and commodity or equity prices as part of a proposed strategy aimed at improving the lenders’ preparedness against threats.

New draft regulations by the Kenya Deposit Insurance Corporation (KDIC) seek to enhance the existing risk-based premium model, which has been in use since July 2021, and where banks pay for their contributions to the deposit insurance fund based on their different risk levels.

Kenyan banks pay premiums to KDIC, with costs wholly borne by the lenders as permitted business expenses.

The scheme is modelled around an arrangement known as the Differential Premium System(DPS), where banks rated low-risk pay 0.15 percent of annual deposits, while those with higher-risk pay up to 0.206 percent.

The DPS currently assesses the contributions based on each bank’s assessment on six components: capital adequacy, asset quality, management quality, earnings, and liquidity (CAMEL).

But in a shift aimed at sharpening the deposit insurance scheme, KDIC now plans to factor market risks and widen the assessment matrix from CAMEL to CAMELS, which includes additional areas such as forex rates.

‘The enhanced CAMELS model is also designed to have a broader view of the capital adequacy, asset quality, management ratio, earnings, and liquidity ratios of banks,’ KDIC told the Business Daily.

‘This will help KDIC to assess how well banks are prepared to handle and respond to market or economic volatility,’ it added.

KDIC is expected to categorise every commercial bank and microfinance institution into a risk band based on the scores derived from the CAMELS model.

The rate of contribution to the deposit insurance fund by each institution shall be calculated by adding the base rate of contribution to the multiplied risk rate and risk weight.

‘The rate of contribution shall vary across risk bands, in a manner that incentivises institutions to maintain prudent risk profiles and strengthen risk management practices,’ KDIC notes in the new draft regulations.

KDIC transitioned contributions to the deposit insurance fund from a flat rate of 0.15 percent of the average annual deposits of each financial institution to the differentiated premium system.

The new system differentiates contributions per bank, where riskier institutions pay more to insure their customer deposits.

The contributions create the deposit insurance fund, which is overseen by KDIC and compensates depositors in the event of a bank failure.

The fund’s balance stood at Sh248.9 billion as of December 2024, while total insured deposits were Sh822.7 billion out of Sh5.74 trillion in total industry deposits.

The enhancement of the contribution model comes as KDIC proposes an enhanced coverage limit of up to Sh1 million per depositor.

The proposed improved coverage is not directly related to the DPS model, but is seen as positive to banking sector customers by improving risk management in the institutions.

‘The DPS model is designed to gradually enhance risk management by banks, improve performance, corporate governance, and resilience. This will be a good thing for depositors, the banking system, and the economy,’ KDIC added.