Corporate lawyers are concerned over proposed changes to Kenya’s banking and competition laws warning that it grants regulators excess power, creating a tougher and expensive businesses regime.
Corporate law firms Anjarwalla & Khanna and Bowmans expressed concern that the proposed amendments to the Competition (Amendment) Bill and Microfinance Bill, could expose businesses to exploitation if not backed by further laws.
In submissions to the Parliamentary committee on finance, the two firms argued that the laws would expand the powers of the Central Bank of Kenya (CBK) and the Competition Authority of Kenya (CAK) without adequate safeguards to protect businesses.
The firms while supporting stronger regulation, warned that some of the proposed powers are too broad and could create uncertainty for investors and companies. They argued that businesses need clear rules and fair processes when regulators take enforcement action.
Anjarwalla & Khanna Principal Associate Kabu Karanja, argued that CBK should not be allowed to enter business premises without court approval except in emergencies as proposed in the Microfinance Bill.
“We are proposing amendments which are geared towards balancing the CBK’s need to act decisively to protect the public while also protecting the rights of businesses that are being investigated,” said Karanja.
The law firm proposed that the regulator should first obtain a High Court warrant before inspecting premises that do not belong to licensed financial institutions.
It also said businesses should be given more time to respond before their licences are revoked and that CBK officials should not be protected from legal action in cases involving gross negligence, abuse of power or violations of constitutional rights.
The firm also wants businesses facing licence cancellation to be given at least 45 days to defend themselves instead of the 28 days proposed in the Bill, arguing that closing a financial institution affects employees, customers and the wider financial system.
Bowmans, on the other hand, argued that the Competition Authority is being given powers that go beyond stopping anti-competitive behaviour and could allow it to interfere in normal business contracts and negotiations.
According to Bowmans, many of the proposed offences are too vague and could expose businesses to penalties for ordinary commercial decisions that do not harm competition.
“I think our first overall general comment is that there appears to be overlap between these new provisions and what is already in the Competition Act,” said Bowman’s Senior Associate at Michelle Karimi told MPs.
“If the government wants to keep the abuse of superior bargaining position provisions, then the abuse of buyer power provisions should be removed because there is a lot of overlap between the two.”
The firm said competition laws should only punish behaviour that harms competition and consumers, rather than becoming a tool for regulating every disagreement between businesses.
Bowmans also opposed proposals to jail business executives for certain competition offences, saying commercial disputes should be handled through administrative penalties instead of criminal sanctions.
Senior Associate at Bowmans Mutugi Mutegi, said regulators should focus on protecting competition without creating unnecessary burdens for businesses.
“Our concern is regulatory overreach by the authority. The authority’s focus should be on harm to competition because that is what competition law is meant to address,” Mutegi said.
The Kenya Bankers Association (KBA) on its part objected to a proposal in the Microfinance Bill to raise the minimum core capital for microfinance institutions to Sh250 million from the current Sh60 million.
KBA finance manager Arnold Wangila said that while increasing capital requirements would strengthen the sector, the proposed four-fold increase would be difficult for many locally owned microfinance firms to achieve.
Instead, he urged lawmakers to adopt a phased increase to between Sh100 million and Sh150 million over five years, saying the approach would give institutions adequate time to meet the new threshold without disrupting their operations.
“Most of the local microfinance firms serve a specified niche, and therefore the shareholders may not be able to raise the proposed capital of Sh250 million,” Wangila told the committee, adding that many firms continue to face profitability challenges.
