Caritas Microfinance Bank Decry New Taxes on Digital Transactions, as MPs defiantly pass Finance Bill 2026

Caritas Microfinance Bank has termed multiple provisions in the Finance Bill  2026 as punitive and detrimental to the country’s economic growth.

The banking sector’s primary grievances center on policies that threaten to inflate transaction costs, increase compliance burdens, and penalize formal employment, with the bank warning that higher costs could fuel inflation and place additional pressure on Kenyan households.

‎Speaking during the bank’s Annual General Meeting (AGM) and the launch of a new Strategic Plan for the next five years, the lender‘s CEO David Mukaru called on the government to instead review the Pay As You Earn (PAYE) tax and reduce it by five percent to increase liquidity in the market.

‎Mukaru argued that lower PAYE deductions would leave workers with more disposable income, enabling them to invest more and stimulate economic growth, appealing to Parliament to consider proposals submitted by microfinance banks in the Finance Bill, including recognizing microfinance institutions as financial institutions under the Income Tax Act.

According to Mukaru, the current legal framework limits the range of financial services they can offer.

‎”Such recognition would enable microfinance banks to expand services, including offering mortgage products to customers,” he said.

‎This comes even as the National Assembly defiantly passed the Finance Bill, 2026, in its Third Reading with 122 votes in favour against 40 nays on Thursday evening. The vote is among efforts by the government to fund the Sh4.8 trillion budget for the 2026-27 fiscal year.

The vote saw the government’s numerical strength prevail despite a consolidated opposition bloc.

‎Caritas growth agenda

Meanwhile Caritas Microfinance Bank has announced plans to grow its current asset base to Kes 22.1 billion in the next five years as part of its multi-year strategic plan for 2025-2030, which the lender said will focus on expanding market share and product offerings while leveraging internal resources and optimizing investment returns.

Mr. Mukaru, said the bold move is part of a long-term expansion approach meant to bolster last year’s impressive performance that saw the lender’s total asset base grow by 30.7% year-over-year to KShs 6.415 billion, driven by strong loan book expansions and increased customer deposits.

“Our third Strategic Plan (2025–2030) marks a historic turning point for Caritas Microfinance Bank. SP3 is an aggressive, tech-driven roadmap designed to scale our impact exponentially—anchored by our target of a KES 22.1 billion asset base, over 300,000 accounts, and a near-total 98% digital adoption model by 2030,” Mukaru said, in an event that also coincided with the launches of the strategic plan and a pre-paid credit card.

The bank’s total income rose 22.4% to KShs 951.35 million in the financial year ending December 31, lifting net profit 35.0% to KShs 72.60 million on loan book and deposit growth as net advances grew 27.3% to KShs 3.857 billion, while customer deposits surged 29.4% to KShs 5.357 billion.

The microlender, which typically lends small loans, savings accounts, and insurance to low-income individuals, entrepreneurs, and small businesses who are ordinarily excluded by traditional banks, further said that it was embarking on an aggressive portfolio restructuring and loan clean-up in an effort to balance its books.

“It is a challenge affecting the entire financial sector, largely due to the economic pressures facing households and MSMEs. But we believe that sustainable lending goes beyond disbursing credit—it involves ensuring that customers borrow responsibly and have the capacity to repay,” said Mukaru.

Adding that, the bank’s focus will be to build financially resilient customers while maintaining a healthy loan portfolio.

“By combining responsible lending, financial education, and proactive portfolio monitoring, we are addressing the challenge in a sustainable manner that protects both our customers and the institution,” he said.

New requirements 

Driven by the Central Bank of Kenya (CBK) requirement to raise the minimum core capital to KSh 5 billion by the end of 2026, Kenyan banks are aggressively pivoting toward asset and scale expansion. Lenders are also pursuing this through regional expansion, capital injections, and deeper SME and MSME lending to remain competitive.

Accounting for over 98% of all businesses in the country, Kenya’s Micro, Small, and Medium Enterprise (MSME) sector contributes 33% to 40% of the national GDP, and employs nearly 15 million people, or 80% of the country’s workforce.

But because these enterprises operate informally, navigating funding continues to be an uphill task, and they often rely on a mix of several primary funding sources, including digital lenders who charge exorbitantly for their loans.

“The growth of digital lenders reflects the increasing demand for convenient and accessible financial services, and we welcome innovations that promote financial inclusion. While speed is important, we believe access to credit should be accompanied by responsibility and a genuine commitment to improving customers’ lives,” he argued.

The deposit-taking microfinance lender was founded by the Catholic Archdiocese of Nairobi in 2025 and remains the most profitable large-tier MFB in Kenya.

New product offerings 

During the event, the bank unveiled a partnership with Airtel Money, allowing customers to transfer funds and conduct transactions between their Airtel Money wallets and Caritas Microfinance Bank accounts.

‎The bank also launched several new products, including prepaid cards targeting schools and colleges to reduce the use of cash among students. In addition, it introduced a solidarity group loan product aimed at empowering youth and women entrepreneurs through financial literacy and entrepreneurship training, with group members acting as collateral for one another.

‎The initiatives form part of the bank’s strategy to expand financial inclusion and provide innovative solutions to underserved communities across the country.