By Daisy Chege
In the wake of COVID-19, the Government has seen it necessary to protect vulnerable citizens in various ways. Pandemics such as these also require new laws to cater for current arising issues which may lack solutions. Clarity on employer to employee relations as well as lender to borrower relationships are some of the ways in which the Government and the law shed light during such unpredictable times.
The novel pandemic (COVID-19) has prompted Governments around the world to come up with regulations to deal with the effects caused by it. The Pandemic Response and Management Bill, 2020 has been proposed by the Senate special committee on COVID-19 to provide a framework for a coordinated response and management of a pandemic and offering of a temporary relief from inability to perform contractual obligations due to the pandemic.
Highlights of the act
The Act defines “Pandemic” as an infectious disease occurring across international boundaries.
- Pandemic Response fund
Under clauses 19 and 20 the Bill establishes a Pandemic Response Fund with the objective to mobilize resources for the response towards containing the spread and impact of the pandemic such as purchasing of necessary equipment for preventions and containment of the pandemic.
As per clause 24, the Cabinet Secretary shall wind up the fund within one month of the publication of a notice in the Gazette stating the end of the pandemic.
- Socio- economic protective measures proposed.
Tax Incentives (clause 25) – the Cabinet with the approval of Parliament will introduce tax incentives to cushion affected persons during the pandemic. The Government should consider extending the tax incentive periods a few months past the pandemic, in as much as activities might resume back to normal the economic impact caused by the pandemic would be beyond the tax incentives granted only during the pandemic.
Loans and mortgages (clause 26 and 27) – during the pandemic and up to two months after the end of the pandemic borrowers and the respective financial institutions may enter into an agreement to review repayment terms, penalties shall not be imposed on a defaulter and a defaulter shall not be listed by a credit reference bureau.
Contractual obligations (clause 28) – Where a contract was entered into before the pandemic which affects the performance of a contractual obligation, the following will be prohibited:
- Levying of execution;
- Enforcement of security over movable and immovable properties;
- Repossession of any goods used for the purpose of trade: and
- Termination of leases or license in the event of non-payment of rent or other monies.
Tenancy agreements (clause 29) – where a tenant’s financial capacity is affected by the pandemic, they will issue a notice in writing to the landlord stating their incapability to meet their obligations due to the pandemic. Therefore, both parties will enter into an agreement on how the tenant shall meet their obligation at the end of the pandemic.
Employer – Employee Relations (clause 30) – In the event the pandemic affects the ability of the employer to pay salaries or wages:
- They shall not terminate employment contracts or dismiss employees;
- They shall not coerce employees to take a salary cut; and
- They shall permit an employee to take up an unpaid leave for the duration of the pandemic.
Utilities (clause 32) – the Government MAY waive water and electricity charges for vulnerable persons and households. The Government may also consult with utility providers on adjusting tariff rates and withhold disconnections for non-payment of utility bill so as cushion individuals and businesses.
Rates and licenses (clause 34) – the bill proposes that County Governments may suspend fees payable on renewal of trade licenses and payment of property rates during the pandemic.
In conclusion, the Bill seeks to introduce a way forward for Kenyans enduring the effects of this pandemic. It intends to cover all the essential areas such as rent and employment contracts.
Moreover, the bill under clause 37 introduces a penalty for misappropriating relief money or materials meant for the pandemic for their own use, will be liable on conviction to a fine not exceeding 10 Million Shillings or imprisonment for a term not exceeding 10 years.
CRB Changes to mobile phone lenders – The Central Bank of Kenya recently announced one of the ways in which various parties can be protected through an attempt to mitigate the impact of the pandemic. A large number of Kenyans have already been negatively listed and with the current economic climate, job losses and reduced salaries are on the rise. Several businesses as well as families are likely to suffer even more resulting in a failure to pay off their loans.
Below are some of the reforms released by the CBK and the Kenyan Government with an aim of protecting vulnerable citizens.
- The Central Bank of Kenya announced that unregistered digital lenders will no longer be allowed to list defaulting borrowers on the Credit Reference Bureau (CRB) for a period of six months. This directive comes as a result of;
- Mobile lenders misuse of the Credit Information Sharing system (CIS).
- An attempt to protect mobile borrowers from the effects of COVID-19.
- The CBK has also added that only defaulters of Sh,1,000.00 and above will be shared with the CRB. Defaulters of less than this amount will therefore be cleared from the CRB records. Data from the CRB shows that a significant amount of those listed are linked to mobile digital borrowers for sums less than Sh 1,000.00.
- Another rule which seeks to benefit the youth, more so, first time job seekers, is an issuance of free first-time clearance certificates.
- Borrowers with loans from registered mobile lenders have also been given some breathing space. M-Shwari for example, powered by the NCBA Group have been handed a month’s relief and will no longer be required to pay the 7.5% fees should their debt roll over into the next month. This suspension will run for a period of 90 days.
- Loans taken by borrowers which fall in arrears from April 1st to September 30th will not lead to the blacklisting of the borrower on the CRB. This will shield borrowers who have been negatively affected by the pandemic from any accruing interest as well as any further losses they may already be experiencing.
In conclusion, the following measures put in place by the Government and the CBK should provide a safety net for borrowers from mobile lenders especially in these. A significant number of Kenyans rely on day to day mobile loans to facilitate both their businesses and their daily lives. It would be unethical for the same companies which have continuously made profit from such mobile loans to take advantage of their clients in such trying times.