Last week a leaked proposal by the finance ministry to tax bank withdrawals caused an uproar in
certain sections of the urban elite.
Under the proposal finance ministry was considering levying a 0.5 percent levy on all bank
withdrawals done over the counter, from ATMs or bank agents.
The main critics of the proposal complained that this amounted to double taxation as a lot of money
held in the bank belongs to salary earners who have already paid Pay As You earn (PAYE) on their
They also warned that people will withdraw all their money from banks defeating another
government objective of widening the access to financial services.
However these are all red herrings. Thankfully in our immediate past we have seen government levy
the same fees on mobile money transactions and the sky did not fall on our heads.
In 2018 government introduced a 0.5 percent levy on mobile money, after initial opposition to the
face value of mobile money transactions reduced to sh66.9trillion in 2018 compared to shs 73 trillion
in 2017, this reluctance has been overcome as shs 80 trillion in transaction in 2019 indicates.
What seems to have changed is the average value of individual transactions. There were 1.3 billion
transactions in 2017 versus 2.5 billion transactions in 2018 and 3.1 billion in 2019.
The high value transactions, this seems to suggested moved to other platforms – maybe the banks,
with the small transactions more than bridging the initial deficit.
This in turn suggests that rather than discourage small users, who are in dire need of access to
financial services, there has been an increase in activity.
Going by this example alone the banks need not fear that their depositors will take flight.
When withdrawal levy was being imposed on mobile money the banking industry was conspicuous
by its silence.
It is no secret that mobile money channels have not only reached prior to this un tapped markets –
the bottom of the pyramid, but the speed at which they have done it has forced a rethink of the
banks’ business models, including them opening themselves to collaborations with the mobile money
In classic divide and rule tactics the government first levied the fees on the less influential telecom
companies and have now three years leater, rounded on the banking industry.
The banks have now recommended that the levy on withdrawals, for both mobile money and banks,
be scrapped and instead an excise duty on transaction fees be levied across the board.
It is true as some people argued that two wrongs don’t make a right, but in the interest of fairness
you either persist with the Injustice or eliminate ot for both the mobile money and banking
The writer is an Economist with 15 years of experience in Banking