The Islamic banking and finance movement is a revolution in the making for rural agriculture based farmers, with it being a major departure from conventionally accepted interest based banking. This Islamic agricultural finance presents the foundation for a potential transformation of peasant economies in North Africa (Egypt, Sudan, Tunisia etc) and parts of Asia (Pakistan, Indonesia and Bangladesh to be a healthy, agriculturally-based, Islamic economies.
The Mudarabah contract is likely to become increasingly popular choice as a mode of financing among poor rural agriculturalists, who seek capital to finance their agricultural activities. This is because the Mudarabah contract is more just, to the farmer and is not exploitive as loans originating from traditional village money lenders of these regions who charge exorbitant amounts of interest.
Issues relating to Islamic agricultural finance
Criteria of financing:
There is an undue emphasis on credit needs of farmers against performance of financing -related criteria like efficient credit decision-making and loan administration , the ability of borrowers to repay debt and risk-bearing by borrowers, contributed most to the current low level of penetration of Islamic agricultural finance. Focusing on credit needs may also have led to distortion of the costs of finance, not being aware of behavioural incentives to be given to farmers profit-making motives and the under-emphasis of agricultural output
Structure:
Islamic agricultural finance consists of informal and formal sources. Informal sources included unorganized Salam (the traditional Islamic mode for agricultural finance, forward payment with deferred delivery), sharecropping, and Musharakah mainly from family members and village money lenders. Formal sources normally include commercial banks and agriculture finance institutions set up by governments and non-governmental organisations.
Informal sources of finance have their own merits which include low administrative costs, simple procedures for lending, absence of collateral, suitability to the borrowing farmers needs and flexibility in repayment of loans. Depending heavily on informal sources of finance, however, have their disadvantages consisting mainly of the susceptibility of farmers to exploitation by lenders in terms of undervaluation of the borrowers crop for sharecropping arrangements and overcharging of interest by village money lenders.
Key challenges for development of Islamic agricultural finance
Challenges and problems encountered by Islamic modes of finance, as applied to Islamic financing of agriculture, are not due to inherent performance-hindering characteristics in these modes, but to structural, institutional and organizational factors most significant among which are the following:
Neglect of element of risk mitigating or transfer mechanisms, identified mainly as, marketing risk, default risk, crop price risk and macroeconomic risk. Sharing and transfer of such risks can be achieved by more prudent screening of borrowers, closer monitoring , rationing of finance, agricultural insurance, using of forward contracts for price risk and better utilization and management of collateral.
Low level of market-based credit systems.
Low level of regulation and supervision. This is mainly due to the public nature of financing institutions, whether specialized or development banks, which means less prudential regulation and supervision and lack of internal control mechanisms and efficient lending procedures.
Emphasis on the goal of quantity of production increase versus the goal of sustainable production and long term productivity enhancement
Low level of operational efficiency. Highly centralized operational structures, deficient risk management tools, absence of proper administrative accountability, technological obsolescence and shortage of investment in human capital.
Conclusion and recommendations
Institutional innovations
Institutional Innovations are needed to have a holistic approach to serving the Islamic agriculture finance niche, focusing on the overall “ecosystem” of the many products and services that are tailored to specific segments in different value chains, and leveraging aggregation and interactions among players in each value chain.
Agricultural Management information system
Management information systems need to be developed for the agricultural sector, to enable the development of a credit scoring system that helps evaluate portfolio risks and make better credit disbursement decisions. The credit scoring systems currently gives relatively minor weight to guarantees, focusing instead on performance indicators; helps reduce the time needed for approval and disbursement of agricultural finance; and allows decentralization of the decision-making process, without restricting appraisal capacity.
Delivery and distribution strategy
The delivery and distribution strategy related to agriculture and sustainable food security systems, may need to be changed as the knowledge of the farmers should allow the Islamic agricultural financier to avoid requiring real collateral as a condition for financing and should, rely instead on assessment of the viability of the farming enterprise.
Develop microfinance institutions
Developing microfinance institutions creates the potential for the coordinated provision of a wider menu of financial services to rural farmers, who would receive short-term financing, and micro-insurance from the same institution and long-term agricultural financing from specialized agricultural finance organisations. This would effectively solve the risk in agricultural finance, get implements financing and long term finance for purchase of assets like tractors and harvesters, to mechanise agriculture.
The following key pointers are important for you to ensure you comply with the MRI regulations from the onset and avoid the penalties and interest that come with non-compliance.
1. MRI is a tax payable by resident persons on residential rental income received.
It is payable by property owners whose residential rent income is Kshs. 12,000 per month (Kshs 144,000 per year) to Kshs. 10 million per annum.
2. The rate of tax is 10% on the gross rent income received. No expenses are allowed for deduction.
3. MRI returns are filed monthly through the iTax portal, on or before the 20th of the following month.
For example Rent received in January is declared and tax paid on or before 20th February.
4. Where there is no rent income received in a given month, you are required to file a NIL return for that month.
5. MRI is a final tax and therefore rental income declared under MRI shall not be declared under the annual return.
6. Late filing of MRI returns attracts a penalty of:
a. Kshs. 2,000 or 5% of the tax due whichever is higher for individuals.
RESIDENTIAL RENTAL INCOME
The following key pointers are important for you to ensure you comply with the MRI regulations from the onset and avoid the penalties and interest that come with non-compliance.
1. MRI is a tax payable by resident persons on residential rental income received.
It is payable by property owners whose residential rent income is Kshs. 12,000 per month (Kshs 144,000 per year) to Kshs. 10 million per annum.
2. The rate of tax is 10% on the gross rent income received. No expenses are allowed for deduction.
3. MRI returns are filed monthly through the iTax portal, on or before the 20th of the following month.
For example Rent received in January is declared and tax paid on or before 20th February.
4. Where there is no rent income received in a given month, you are required to file a NIL return for that month.
5. MRI is a final tax and therefore rental income declared under MRI shall not be declared under the annual return.
6. Late filing of MRI returns attracts a penalty of:
a. Kshs. 2,000 or 5% of the tax due whichever is higher for individuals.
b. Kshs. 20,000 or 5% of the tax due whichever is higher for corporates
b. Kshs. 20,000 or 5% of the tax due whichever is higher for corporates
7. Late payment penalty is 5% of the tax due while late payment interest is 1% per month.
FRINGE BENEFIT TAX
For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 7%. This rate shall be applicable for the three months of January, February and March 2020.
DEEMED INTEREST RATE
For purposes of section 16(5), the prescribed rate of interest is 7%. This is applicable for the months of January, February and March 2020.
Withholding tax rate of 15% on the deemed interest shall be deducted and paid to the Commissioner by 20th of the month following the month of computation.
LOW INTEREST BENEFIT
For the purposes of section 5(2A) of the Income Tax Act, the prescribed interest rate for the period of six months covering January-June 2020 shall be 7%.
Are you struggling to save up for retirement, pay off student loan debt, or simply stay on top of your monthly rent? You’re not alone. When it comes to worries that keep us up at night, financial woes consistently rank at the top.
Stress of any kind is one of the leading contributors to insomnia. Financial stress is no different. People in poor financial health are more likely to suffer from disrupted sleep, short sleep, and sleep disorders like sleep apnea.
Your financial health impacts your sleep. The reverse is also true. With poorer sleep, it’s harder to make sound economic decisions, stay productive, and cope with financial hardship. As a result, your financial health may worsen.
What’s behind the link between financial health and sleep? Below, we review the sleep issues related to financial health, and offer tips for better sleep and money management.
How Sleep Impacts Your Financial Health
Sleep and Financial Health Are Connected
Money is the top source of stress for most Americans, according to the latest research from the American Psychological Association. One in four adults feel stressed about money all of the time, with over half having “just enough” money to make ends meet each month.
The prevalence of financial stress has been confirmed by several other sources. According to PwC, financial matters far surpass stress over our jobs, relationships, and health.
Sleep Disorders Associated with Poor Financial Health
On a daily basis, people who are financially stressed get less sleep than their less-stressed peers. They also have a higher risk of sleep disorders like insomnia and sleep apnea.
Insomnia describes an inability to fall or stay asleep. Symptoms include daytime sleepiness, nighttime awakenings, and low energy. Chronic insomnia, which lasts months or more, increases your risk of developing long-term health conditions like obesity, diabetes, and cardiovascular disease.
Likewise, financial stress has been linked to an increased risk of dying from a cardiovascular event, as well as contracting metabolic syndrome, a common precursor to heart disease, diabetes, and stroke.
Obstructive sleep apnea (OSA) describes a condition where the individual experiences temporary lapses in breathing while they sleep, resulting in a gasping or choking sound. Symptoms include waking up with a headache, weight gain, mood changes, and tiredness.
Individuals with OSA spend more than twice the number of days in the hospital than healthy peers. They also have nearly double the healthcare bills, amounting to an average difference of $50,000.
Either of these sleep conditions result in sleep deprivation. Sleep deprivation is what it sounds like: it describes a state of being sleep-deprived, whether that’s after an all-nighter, or missing out on just a few hours of sleep for days, months, or years.
Symptoms include trouble with memory, concentration, or focus; increased irritability, impulsivity, and mood swings; and a decrease in coordination and balance.
Finances and Mental Health
Just under 60 percent of Americans acknowledge that the state of their financial health worsens their mental health. Mental health issues are consistently linked to sleep problems, like taking longer to fall asleep and waking frequently during the night (both classic symptoms of insomnia). Reduced motivation, changes in sleeping or eating habits, and substance abuse are also warning signs.
Unfortunately, these are some of the same coping behaviors used by individuals with high financial stress, according to the APA survey cited above. For individuals with financial stress, common “unhealthy behaviors” may include (in approximate order of prevalence): watching TV for over two hours a day, surfing the internet, napping, eating, drinking alcohol, or smoking.
These folks were also more than twice as likely to describe their health as fair or poor.
Binge-watching television or surfing the internet requires the use of electronic devices. These flood your brain with the same blue light your brain perceives as sunlight, delaying melatonin production and your ability to fall asleep.
Napping seems like it’d be good for sleep, but overindulging in daytime naps can reduce your ability to sleep at night, leading to insomnia.
Like alcohol and smoking, obesity is equated with breathing disorders like sleep apnea. Independent of obesity or weight gain, binge-eating can also double the risk of sleep problems.
Income and Socioeconomic Stressors
Since the 2008 recession, the income gap between those who stress about money and those who don’t has widened. Only 18 percent of adults in higher-income households feel constantly stressed about money, compared with 36 percent of adults in lower-income households.Source: APA
Lower-income households are also more likely to regularly miss out on sleep. The CDC has charted a linear relationship between poverty status and sleep loss, as have numerous other studies. For example, one study found that the individuals making below $16,000 (Income Level 1 in the charts, below) can spend up to three times longer trying to fall asleep than those making $100,000 or more (Income Level 7).Source: American Journal of Epidemiology
A similar trend held true for racial and ethnic minorities. In fact, some studies have found that racial discrimination alone can be a stressor that leads to disturbed sleep.
These sleep differences may also be explained by conditions common to lower-income households and socioeconomic status, such as noisier and more crowded neighborhoods. Beyond financial stress, those living below the poverty line may also have food insecurity, which has similarly been correlated with fragmented sleep.
Why Sleep Impacts Financial Health
Financial stress makes it hard to fall asleep at night. Over time, those restless nights create a state of sleep deprivation, which in turn, impacts your ability to manage your finances wisely. Below, we review the mechanics of this vicious cycle, primarily through the effects of sleep deprivation on your cognitive performance and decision-making skills.
All of these are bad enough on their own. Worse, sleep-deprived individuals have to expend even more effort, simply trying to be as functional as they would be after a full night’s rest. Further, when they do perform tasks well, their ability to do so swiftly declines the longer they keep working.
Plus, studies frequently find that individuals remain unaware of their sleep deprivation, so they may not even realize they’re making mistakes.
It’s common for people to see a list like this and shrug it off, assuming that the odd sleepless night or a few weeks without great sleep shouldn’t make too much of a difference. This only becomes a problem when it’s a chronic issue, right? Wrong.
These issues present after just one night of short sleep. That means that if you get less than the recommended seven hours of sleep for adults, you can expect to be as cognitively impaired as you would be if you had pulled an all-nighter.
One study found that the performance impairment of a group who slept six hours or less per night was equivalent to those who didn’t sleep at all for two nights in a row. That’s only a difference of one hour.
Unfortunately, this kind of chronic sleep deprivation is common. According to the CDC, about one-third of Americans experience this short sleep on a regular basis. The longer you stick to a short sleep schedule, the worse you can expect to perform as time goes on:Source: Sleep
Impacts in the Workplace
For workers, the cumulative effects of sleep depression often result in absenteeism or presenteeism. Presenteeism refers to those who come to work when they’re ill or fatigued, so they’re not able to perform at normal levels. They may be at work, but they’re not truly present. Researchers estimate the lack of productivity due to sleep deprivation could be costing the U.S. economy as much as $411 billion.
At a more personal level, these cognitive impairments can take a toll on your financial health. An impaired ability to remember things and stay focused makes you less effective at work, reducing your chances of getting a raise or achieving quarterly goals and bonuses.
Eventually, your productivity may be so reduced that you have to work longer hours, creating more stress and exhaustion. You may accidentally fall asleep during meetings, which your colleagues may interpret as you not caring about your job.
Increased errors at work can lead to poor performance reviews or job loss. Those who have physical jobs, like construction workers and others who use their hands to operate equipment, can be at particular risk. Workers with severe insomnia are 70 percent more likely to incur a work-related injury than their better-sleeping colleagues, and disturbed sleep nearly doubles the risk of dying in a workplace accident.
Impaired Judgment and Decision-Making
Cognitive impairments can have an impact outside of the workplace, as well. Sleep-deprived individuals are prone to rash judgment, poor decision-making, and increased risk-taking.
When you’re sleep-deprived, you may be more likely to make impulse purchases, or have a tougher time convincing yourself to stick to your budget. You may feel so exhausted that you make big purchases quickly, without taking time to shop around for the best deal.
One intriguing study from 2011 found that sleep loss impacts your brain’s ability to accurately assess economic consequences. When you make decisions while sleep-deprived, brain activity increases in the areas that process positive outcomes, and decreases in the areas that process negative outcomes.
In other words, a sleep-deprived brain is so attracted to an opportunity of monetary gain, that it’s less able to consider the potential negative consequences of an economic decision.“Even if someone makes very sound, risky financial decisions after a normal night of sleep, there is no guarantee that this same person will not expose you to untoward risk if sleep deprived.”
The researchers were able to observe these changes in the participants’ brain activity. In the images below, RW stands for “rested wakefulness” and SD stands for “sleep deprivation.”Source: Journal of Neuroscience
How to Improve Your Sleep and Financial Health
If you’re struggling to improve your finances, the key may not be pushing yourself to the edge. Paradoxically, it may be as simple as getting more sleep. According to one study, increasing your average weekly sleep by just one hour could lead to a 5 percent increase in income.
Below, we share tips for getting a better handle on your finances, and your sleep.
1. Map Out Your Finances.
Sometimes, anxiety over money intensifies due to a nebulous fear of “not making enough,” even for those who make the most. When the unknown becomes known, it often becomes less frightening.
Sit down and take account of your finances and your financial goals. Then, chart out the income you need to earn, and the savings you need to build, in order to reach those financial goals. This process gives you back a sense of control over your finances, helping you feel more confident and less fearful.
2. Reduce Your Expenses.
The above process will likely point out areas where you can spend less money. Common culprits include eating out, entertainment, apparel, and consumer goods. Make a commitment to spend less in these categories, and immediately raise cash by selling items you no longer use.
Late fees can be another common, and unnecessary, expense. Save yourself time, money, and stress by setting up your bills to auto-pay.
3. Eat Better and Exercise.
Instead of overspending on restaurants, opt for healthier meals at home. A healthy diet makes for healthier sleep, and a healthier body overall — reducing your chances of costly illness and insurance claims. Good foods for sleep include leafy greens, cheese, eggs, nuts, fish, and beans. For deeper sleep, avoid eating anything too spicy, sugary, or heavy before bed. Likewise, limit your caffeine and alcohol consumption.
Pair your better diet with a regular exercise routine, too. Exercising regularly, particularly in the morning, helps tire you out by nighttime. It’s also a good stress management technique. Free forms of exercise include running, walking, or practicing yoga at home.
4. Build Your Savings.
Building up your savings relieves financial insecurity and helps you achieve your financial goals faster. If you’re worried about retirement, start contributing to your employer’s 401(k) plan or set up an independent retirement savings account.
Experts recommend putting away at least 10 percent of your income into a retirement plan. If that’s not feasible today, start with 1 percent, then make a plan to increase it every six months or every year until you reach 10 percent.
Worried about losing your job or a financial loss? Build up a rainy day fund. Decide on a number, whether it’s $25 or $100, and automatically transfer it to a savings account each month.
5. Stay on Track with To-Do Lists.
Each night, before you go to bed, write down any financial worries you have. Taking them out of your head and onto a piece of paper helps you clear them from your mind, making it easier to fall asleep. Then, write out a to-do list with special attention to the tasks you can complete the following day to improve or maintain your financial health. This process has been scientifically proven to speed up the time it takes you to fall asleep.
6. Sleep Like a Pro.
Now that you’ve organized your finances, take the time to organize your sleep. Set a sleep and wake time, and follow them religiously each day. Going to sleep at differing times disrupts your circadian rhythms, making it harder to get regular sleep.
Treat bedtime seriously. Keep your bedroom dark, cool, and quiet. Take 30 minutes before bed to complete your financial to-do list, and prepare yourself for sleep. Calm yourself with soft music, reading, or meditation. Avoid using electronics.
Final Thoughts
Your personal financial health seems like a matter of money management. But, financial health doesn’t exist in a vacuum. The quality of your sleep directly impacts your ability to manage your finances wisely.
Poor sleep impairs your cognitive performance, judgment, and decision-making skills, reducing your ability to earn an income and make sound financial decisions. Sleep loss also profoundly affects various aspects of your overall physical health, many of which compound one another and contribute to more financial health problems.
On the other hand, good sleep supports improved productivity, focus, and all-around well-being. You’re better equipped to cope with financial stress, stick to your budget, and reach your financial goals.
Avoid the consequences of sleep loss by making a commitment to stronger financial health. Start with the tips above: mapping out your goals, reducing expenses, and building your savings. Then, stay on track with to-do lists and better sleep habits.
Additional Tuck Resources
Learn more about finances and sleep at the links below.
When it comes to success, we all know the stereotype: the successful don’t sleep. Whether it’s a tech CEO leading a risky new startup or a famous author working on her latest best-seller, everyone believes that earning more means working more, and working more inevitably means sleeping less. It’s a trade-off most of us expect to make eventually, if we’re not making it already.
Yet when it comes to scientific data to back up this idea, there’s often not much to be found. At Tuck, we wanted to know: how does the sleep/work trade-off really work? Is it really true—statistically true—that sleeping less means earning more? Might there be exceptions to the rule? And how do specific careers compare with one another in this regard?
Without clear answers, we decided to take scientific matters into our own hands. To get to the bottom of these questions, we went straight to one of the most authoritative sources available: the Bureau of Labor Statistics’ 2016 American Time Use Survey. Published annually since 2004, the American Time Use Survey gives analysts, journalists, and social scientists a comprehensive look at how Americans spend their days—including those huge time-takers, work and sleep.
The BLS dataset for 2016 included data from about 10,000 respondents. We used this data to run a regression analysis, which gave us the relationship between hours worked and hours slept we were looking for (read about our complete methodology below).
The results were fascinating. On the one hand, we confirmed some hunches (such as that those in legal professions would, on average, be the highest paid while working the most and sleeping the least). On the other, some results were less predictable. Scientists and architects saw quite high weekly pay, while getting close to average sleep, for instance. And teachers, who you might expect to be both low earners and low sleepers, fell almost exactly at the average in both categories. Though the rule was generally true—the more you work, the more you earn, and yes, the less you sleep—there were a few big exceptions to be found. What you’ll learn about coders will definitely surprise you.
These kinds of comparisons between professions were the real fruit of our analytical labor. Finally, we compiled them into gorgeous charts and assembled them into a handy infographic, to make reading and understanding these findings as pleasant and informative impossible. Check it out, find your job on the charts, and see how your own work and sleep numbers compare to those of other careers.
Our Findings
Methodology/Research
Data Transformations
The data used for this report was sourced from the Bureau of Labor Statistics’ (BLS) American Time Use Survey for 2016, a survey with roughly 10,000 respondents. We hope to gain some insight about American sleep patterns from the survey. To do this, data has been compiled from three sources:
1) The ATUS Respondent data file, which contains employment and wage information about respondents 2) The ATUS Roster data file, which contains respondents’ basic information such as age and gender 3) The ATUS Activity Summary data file, which contains total time slept per 24 hour period of the ‘diary day’ during which activities are recorded
Data for the linear model is reformatted and modified only to include employed respondents with basic wage and hours worked information (e.g. respondents who did not provide that information were not included) reducing the dataset to 3165 respondents, and moderately limiting the generalizability of any results to the population at large.
Data for the occupation averages is also reformatted to only include respondents with wage, hours worked, and occupation code information, and surveyed on weekdays, limiting the set to just over 1500 respondents. Differences in the the ‘employed’ vs ‘not employed’ sets may be attributable to subjective states of employment (full time / part time, contractor etc) that are not accounted for in this analysis.
With additional resources, the BLS data could be re-weighted to accommodate for generalizability but for now the report should be treated as an exploratory analysis.
Linear Model Independent variables were added one by one (a hierarchical regression) to the model according to how well correlated they were to the dependent variable (minutes slept) and a qualitative assessment of relevance.
The order of inclusion is as listed in the table below.
At each step, variables were assessed for significance; no variables were dropped from the analysis as all showed as significant. VIF gave no indication of issues of multicollinearity at any stage in the regression.
ESTIMATE
STD. ERROR
T VALUE
PR(>|T|)
(Intercept)
649.58105114
11.71207275
55.463
< 0.0000000000000002
***
WEEKLY WAGE
-0.00012170
0.00002939
-4.142
0.00003538856
***
WEEKLY HOURS WORKED
-0.36624540
0.14400680
-2.543
0.01103
*
MONDAY
-85.33333466
7.28848977
-11.708
< 0.0000000000000002
***
TUESDAY
-99.26489203
7.45254723
-13.320
< 0.0000000000000002
***
WEDNESDAY
-84.82596687
7.50065494
-11.309
< 0.0000000000000002
***
THURSDAY
-91.44458188
7.71517698
-11.853
< 0.0000000000000002
***
FRIDAY
-98.51182464
7.59262418
-12.975
< 0.0000000000000002
***
SATURDAY
-35.80854986
5.83709677
q-6.135
0.00000000096
***
AGE
-1.05792752
0.18897410
-5.598
0.00000002351
***
MALE
-9.42782764
4.33410636
-2.175
0.02968
*
CHILDREN
-5.41919328
1.92972135
-2.808
0.00501
**
The Raw Numbers:
CENSUS_OCCUPATION
CODE
WEEKLY WAGE AVERAGE
WEEKLY WAGE STD
WEEKLY HOURS AVERAGE
WEEKLY HOURS STD
SLEEP AVERAGE (MINUTES)
SLEEP STD (MINUTES)
Personal care and service occupations
PCS
362.73
369.54
24.47
19.9
543.13
144.36
Food preparation and serving related occupations
FPS
398.17
240.23
30.39
16.5
541.76
133.35
Healthcare support occupations
HCS
426.47
279.71
31.31
15.53
472.57
135.64
Building and grounds cleaning and maintenance occupations
BGCM
430.1
281.51
30.55
17.07
495.51
126.81
Farming, fishing, and forestry occupations
FFF
487.68
352.26
38.46
13.81
480.33
88.34
Office and administrative support occupations
OAS
755.36
476.57
35.84
14.33
485
100.36
Production occupations
P
823.84
537.59
39.48
14.86
488.79
128.29
Transportation and material moving occupations
TMM
826.07
638.8
39.4
16.28
506.52
153.35
Sales and related occupations
SR
843.76
765.22
38
17.81
490.97
116.94
Community and social service occupations
CSS
900.04
546.81
36.38
16.57
488.17
111.59
Installation, maintenance, and repair occupations
IMR
956.17
415.39
42.46
11.42
462.71
90.04
Education, training, and library occupations
ETL
963.4
640.54
37.07
17.4
472.28
95.52
Construction and extraction occupations
CE
967.52
552
37.46
17.05
457.11
88.11
Arts, design, entertainment, sports, and media occupations
ADESM
1046.82
747.95
32.73
16.93
434.21
91.72
Protective service occupations
PS
1108.41
709.98
41.89
20.15
445.31
159.21
Healthcare practitioner and technical occupations
HCPT
1180.9
682.78
37.68
15.13
472.12
133.27
Business and financial operations occupations
BFO
1364.53
760.55
40.8
12.08
459.68
95.66
Management Occupations
MGMT
1476.97
780.06
43.57
14.1
460
89.68
Life, Physical, and social science occupations
LPSS
1654.36
810.06
41.51
15.88
468.08
140.62
Architecture and engineering occupations
AE
1678.96
696.01
42.85
9.75
465.73
81.85
Computer and mathematical science occupations
CMS
1752.05
719.75
42.41
9.99
477.62
87.46
Legal occupations
L
1833.48
817.43
42.38
14.67
432.56
93.82
AVERAGES
1010.808636
NA
37.595
NA
477.28
NA
Fair Use
If you appreciate what you’ve learned here about sleep and labor, please feel free to share our graphic as well as the data as you wish. We simply ask that you link back to this page to credit Tuck as the author of this content.
The turnover tax was re-introduced in the Finance Act 2019 effective 1st January 2020 with similar regulations previously applied.
Notable changes are;
Monthly submission of the TOT returns by 20th of the following month.
Presumptive tax is still applicable in addition to the TOT
Presumptive tax can be claimed as a credit against TOT payments.
Previous regulations include;
3% TOT on gross turnover. No expenses deductible.
Gross turnover should not exceed 5 million a year.
TOT does not apply to Limited Companies, Employment Income, Management Income, Professional Income, Rental Income, and VAT registered individuals or businesses with over 5m turnover a year.
Commissioner approval is required to remain in the normal income tax regime.
Late submission penalty – Kshs. 5,000 for each month.
PRESUMPTIVE TAX (PT)
Presumptive tax remains at 15% of the single business permit.
Notable changes as a result of the Finance Act 2019;
PT is no longer a final tax.
PT can be claimed as a credit against TOT payable.
Previous regulations that are still effective;
Payable by individuals to whom a business permit or a trade license is issued by the County Government.
Payable at the time of payment for the County Government business permit or trade license.
Commissioner approval is required to remain in the normal income tax regime.
PT does not apply to Limited Companies, Employment Income, Management Income, Professional Income, Rental Income and VAT registered individuals’ or businesses with over 5m turnover a year.
Late submission penalty – 5% of the PT due.
FINANCE ACT – SUMMARY OF TAX CHANGES
Income earned by an individual in the Ajira Programme is exempt from tax for the first three years on set criteria.
The amount withdrawn from the National Housing Development Fund to purchase a house by a contributor who is a first-time homeowner is exempt from tax
The amount of affordable housing relief shall be 15% of the employee’s contribution but shall not exceed KES 108,000 per annum.
Plastics recycling plant will be entitled to a reduced corporate income tax rate of 15% for the first five years upon commencement of its operations.
Import Declaration Fee (IDF) to 3.5% of the customs value of goods imported for home use.
IDF reduced to 1.5% on the customs value of raw materials imported by manufacturers, approved imports by the CS and input for the construction of homes under the affordable housing scheme approved by CS.
Railway Development Levy (RDL) from 1.5% to 2% of the customs value of goods imported for home use.
Withholding VAT reduced to 2%.
Non-registered persons importing taxable services will now be required to account for reverse VAT.
Excise Duty rate changes
Excise Duty rate changes – Other items (Sin Tax)
INDIVIDUAL TAXATION
A person is considered to be tax resident in Kenya if they:
have a permanent home in Kenya and were present in Kenya for any period in a particular year of income under consideration, or
do not have a permanent home in Kenya but were:
present in Kenya for 183 days or more in that year of income, or
Present in Kenya in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each year of income.
Individual Tax Bands and Rates
Monthly Pay Bands-1st January 2018
Annual Pay Bands-1st January 2018
Rate of Tax
1 – 12,298
1 – 147,580
10%
12,299 – 23,885
147,581- 286,623
15%
23,886 – 35,472
286,624 – 425,666
20%
35,473 – 47,059
425,667 – 564,709
25%
Above 47,060
Above 564,710
30%
Personal Tax Relief
1,408.00
16,896.00
Residential rental income – 10% of gross residential rental income received payable monthly before the 20th of the following month. Annual gross residential rental income should not exceed 10 million shillings.
Life, health and education relief is 15% of the premium paid but cannot exceed Kshs. 60,000 p.a
Affordable housing tax relief – 15% of gross emoluments at a maximum of Kshs. 108,000 p.a (Starts at time of application and awaiting allocation of a house under the affordable housing scheme)
Mortgage interest on the owner-occupied house at a maximum amount of Kshs. 300,000 p.a is deductible
Gratuity and payments to a registered pension scheme are deductible to a maximum of Kshs. 240,000 p.a but cannot exceed 30% of the emoluments.
A homeownership savings plan – Contributions not exceeding Kshs. 96,000 p.a is deductible.
Bonuses and overtime paid to low-income earners is tax-free.
2,000 per day allowance for traveling for an individual outside his normal place of work is tax-free.
TAXABLE EMPLOYEE BENEFITS
Motor vehicles benefit taxed at 2% of the cost of the vehicle or the prescribed rate; whichever is higher.
Telephone and mobile is taxed at 30% of the cost to the employer
Furniture – 1% of the cost to the employer
Housing – higher of the market rate or actual rent paid or 15% of total employee income.
Employee loans are subject to Fringe Benefits Tax (FBT)
MONTHLY NHIF CONTRIBUTIONS
Changes in NHIF Regulations;
Limit cover to a maximum of one spouse and five children
New members will have to wait for 90 days before accessing services or benefits in addition to making a one year upfront payment within the 90 days waiting period.
Late payment of contributions will attract a fine of 50% of the monthly contribution and a requirement to pay one year in advance. Benefits and services will be restricted for a period of 30 days.
Defaulting for more than 12 months will require re-registration and benefits and services can only be accessed after 90 days of resuming payments. A one year upfront payment will be required.
Access to specialized services shall be restricted to 6 months waiting period following card maturity for new members.
Access to maternity benefit will be restricted to 6 months waiting period following card maturity for both principal members and spouse declared.
Any dependent declared after registration shall be subject to the 6 months waiting for the period for specialized and maternity services.
For inpatient and medical outpatient, additional dependents will be eligible for the benefit apply after 30 days waiting period. The same applied for a change of spouse.
Government-funded programs like free maternity, health insurance subsidy, elderly persons with severe disabilities and Inua Jamii have been exempted from these changes
On Saturday 1st June 2019, the Central Bank of Kenya announced that it shall be issuing new generation notes, and specifically for the Kshs 1,000 note currently in circulation would cease to be legal tender from 1st October 2019. See links below
The Governor of the Central Bank of Kenya in this remarks on the launch said “ Your Excellency, the new banknotes will circulate alongside those previously issued but not withdrawn. However, we have assessed the grave concern that our large banknotes—particularly the older one thousand shillings series—are being used for illicit financial flows in Kenya and also other countries in the region. More recently we have seen the emergence of some counterfeits. These are grave concerns that would jeopardize proper transactions and the conduct of commerce in our currency. To deal conclusively with these concerns, all the older one thousand shillings series shall be withdrawn. By a Gazette Notice dated May 31, 2019, all persons have until October 1, 2019, to exchange those notes, after which the older one thousand shillings banknotes will cease to be legal tender. “
This has created a panic situation as Kshs 1,000/= notes held by individuals and organized crime syndicates are likely to offload these in the economy either by banking into bank accounts, purchasing high-value vehicles from motor dealers, purchasing gold, other precious metals and gemstones from jeweler’s and gemstone traders, purchasing property from property developers and estate agents or even general goods paying in cash which has been hoarded and may be proceeds of physical crime, proceeds of economic crime and corruption, money accumulated but not declared for tax purposes (tax evasion), all this would be covered under the term “money laundering”. Thus businesses should be vigilant to not becoming unknowingly conduits for and accessories to money laundering. Kenya has a PROCEEDS OF CRIME AND ANTI-MONEY LAUNDERING ACT (CHAPTER 59B), which covers these offenses.
Money laundering is defined as: ‘The funneling of cash or other funds generated from illegal activities through legitimate financial institutions and businesses to conceal the source of the funds.’ Anti-Money Laundering, 2nd ed., IFAC, 2004
Key Definition’s 1/2
“Agency Director” means the Director of the Agency appointed under section 53(2);
“authorised officer” means—
(a) a police officer;
(b) an officer of the department of the Kenya Revenue Authority;
(c) Agency Director; or
(d) any person or class of persons designated by the Minister as an authorized officer to perform any function under this Act;
“Board” means the Anti-Money Laundering Advisory Board established under section 49;
“Centre” means the Financial Reporting Centre established under section 21;
“confiscation order” means an order referred to in section 61
“designated non-financial businesses or professions” means—
(a) casinos (including internet casinos);
(b) real estate agencies;
(c) dealing in precious metals;
(d) dealing in precious stones;
(e) accountants, who are sole practitioners or are partners in their professional firms;
(f) non-governmental organizations;
(g) such other business or profession in which the risk of money laundering exists as the Minister may, on the advice of the Centre Director,
“estate agency” in connection with the selling, mortgaging, charging, letting or management of immovable property or of any house, shop or other building forming part thereof, means doing any of the following acts—
(a) bringing together, or taking steps to bring together, a prospective vendor, lessor or lender and a prospective purchaser, lessee or borrower; or
(b) negotiating the terms of sale, mortgage, charge or letting as an intermediary between or on behalf of either of the principals;
“financial institution” means any person or entity, which conducts as a
business, one or more of the following activities or operations—
(a) accepting deposits and other repayable funds from the public;
(b) lending, including consumer credit, mortgage credit, factoring, with or without recourse, and financing of commercial transactions;
(c) financial leasing;
(d) transferring of funds or value, by any means, including both formal and informal channels;
(e) issuing and managing means of payment (such as credit and debit cards, cheques, travelers’ cheques, money orders and bankers’drafts, and electronic money);
(f) financial guarantees and commitments;
(g) trading in – (i) money market instruments, including cheques, bills, certificates of deposit and derivatives; (ii) foreign exchange; (iii) exchange, interest rate and index funds; (iv) transferable securities; and (v) commodity futures trading;
(h) participation in securities issues and the provision of financial services related to such issues;
(i) individual and collective portfolio management;
(j) safekeeping and administration of cash or liquid securities on behalf of other persons;
(k) otherwise investing, administering or managing funds or money on behalf of other persons;
(l) underwriting and placement of life insurance and other investment-related insurance; and
(m) money and currency changing;
“money laundering” means an offense under any of the provisions of sections 3, 4 and 7;
“offense” in this Act, means an offense against a provision of any law in Kenya, or an offense against a provision of any law in a foreign state for conduct which, if it occurred in Kenya, would constitute an offense against a provision of any law in Kenya;
“person” means any natural or legal person;
“proceeds of crime” means any property or economic advantage derived or realized, directly or indirectly, as a result of or in connection with an offense irrespective of the identity of the offender and includes, on a proportional basis, property into which any property derived or realized directly from the offense was later successively converted, transformed or intermingled, as well as income, capital or other economic gains or benefits derived or realized from such property from the time the offense was committed;
“property” means all monetary instruments and all other real or personal property of every description, including things in action or other incorporeal or heritable property, whether situated in Kenya or elsewhere, whether tangible or intangible, and includes an interest in any such property and any such legal documents or instruments evidencing title to or interest in such property; property of every description, including things in action or other incorporeal or heritable property, whether situated in Kenya or elsewhere, whether tangible or intangible and includes an interest in any such property and any such legal documents or instruments evidencing title to or interest in such property;
“reporting institution” means a financial institution and designated nonfinancial business and profession;
Relevant Sections of the Act
Offenses penalized under Section 16 (1)
Money laundering
A person who knows or who ought reasonably to have known that property is or forms part of the proceeds of crime and—
(a) enters into any agreement or engages in any arrangement or transaction with anyone in connection with that property, whether that agreement, arrangement or transaction is legally enforceable or not; or
(b) performs any other act in connection with such property, whether it is performed independently or with any other person, whose effect is to—
(i) conceal or disguise the nature, source, location, disposition or movement of the said property or the ownership thereof or any interest which anyone may have in respect thereof; or
(ii) enable or assist any person who has committed or commits an offense, whether in Kenya or elsewhere to avoid prosecution; or
(iii) remove or diminish any property acquired directly, or indirectly, as a result of the commission of an offense, commits an offense.
Acquisition, possession or use of proceeds of crime
A person who—
(a) acquires; (b) uses; or (c) has possession of, property and who, at the time of acquisition, use or possession of such property, knows or ought reasonably to have known that it is or forms part of the proceeds of a crime committed by him or by another person, commits an offense.
Financial promotion of an offense
A person who, knowingly transports, transmits, transfers or receives or attempts to transport, transmit, transfer or receive a monetary instrument or anything of value to another person, with intent to commit an offense, that person commits an offense.
Offenses penalized under Section 16 (2)
Failure to report suspicion regarding proceeds of crime
A person who willfully fails to comply with an obligation contemplated in section 44(2) commits an offense.
Tipping off
(1) A person who—
(i) knows or ought reasonably to have known that a report under section 44 is being prepared or has been or is about to be sent to the Centre; and (ii) discloses to another person information or other matters relating to a report made under paragraph (i).
(2) In proceedings for an offense under this section, it is a defense to prove that the person did not know or have reasonable grounds to suspect that the disclosure was likely to prejudice a report made under subsection (1).
Failure to comply with the provisions of this Act
(1) A reporting institution that fails to comply with any of the requirements of sections 44, 45 and 46, or of any regulations, commits an offense.
Misuse of information
(1) A person who knows or ought reasonably to have known—
(a) that information has been disclosed under the provisions of Part II; or
(b) that an investigation is being, or maybe, conducted as a result of such a disclosure, and directly or indirectly alerts, or brings information to the attention of another person who will or is likely to prejudice such an investigation, commits an offense.
Offenses penalized under Section 16 (3)
Conveyance of monetary instruments to or from Kenya
(3) A person who willfully fails to report the conveyance of monetary instruments into or out of Kenya, or materially misrepresents the number of monetary instruments reported in accordance with the requirements of subsection (1) commits an offense.
Offenses penalized under Section 16 (4)
Misrepresentation
A person who knowingly makes a false, fictitious or fraudulent statement or representation, or makes, or provides, any false document, knowing the same to contain any false, fictitious or fraudulent statement or entry, to a reporting institution, or to a supervisory body or to the Centre, commits an offense.
Malicious reporting
Any person who willfully gives any information to the Centre or an authorized officer knowing such information to be false commits an offense.
Failure to comply with the order of the court
A person who intentionally refuses or fails to comply with an order of a court made under this Act commits an offense.
Penalties
(1) A person who contravenes any of the provisions of sections 3, 4 or 7 is on
conviction liable—
(a) in the case of a natural person, to imprisonment, for a term not exceeding fourteen years, or a fine not exceeding five million shillings or the amount of the value of the property involved in the offense, whichever is the higher, or to both the fine and imprisonment; and
(b) in the case of a body corporate, to a fine not exceeding twenty-five million shillings, or the amount of the value of the property involved in the offense, whichever is the higher.
(2) A person who contravenes any of the provisions of sections 5, 8, 11(1) or 13 is on conviction liable—
(a) in the case of a natural person, to imprisonment for a term not exceeding seven years, or a fine not exceeding two million, five hundred thousand shillings, or to both and
(b) in the case of a body corporate, to a fine not exceeding ten million shillings or the amount of the value of the property involved in the offense, whichever is the higher.
(3) A person who contravenes any of the provisions of section 12(3) is on conviction, liable to a fine not exceeding ten percent of the amount of the monetary instruments involved in the offense.
(4) A person who contravenes the provisions of section 9, 10 or 14 is on conviction liable—
(a) in the case of a natural person, to imprisonment for a term not exceeding two years, or a fine not exceeding one million shillings, or to both and
(b) in the case of a body corporate, to a fine not exceeding five million shillings or the amount of the value of the property involved in the offense, whichever is the higher.
(5) Deleted by Act No. 51 of 2012, s. 6.
(6) Where any offense under this Part is committed by a body corporate with the consent or connivance of any director, manager, secretary or any other officer of the body corporate, or any person purporting to act in such capacity, that person, as well as the body corporate, shall be prosecuted in accordance with the provisions of this Act.
Secrecy obligations overridden
(1) The provisions of this Act shall override any obligation as to secrecy or other restriction on disclosure of information imposed by any other law or otherwise.
(2) No liability based on a breach of an obligation as to secrecy or any restriction on the disclosure of information, whether imposed by any law, the common law or any agreement, shall arise from disclosure of any information in compliance with any obligation imposed by this Act.
Why tax evasion is also considered part of money laundering?
Businesses cannot hide under the pretext I know the person, he is a business person and not a criminal, by accepting payments in Kshs 1,000 notes for major capital assets purchases like vehicles, real estate properties, jewelry, and gemstones, because the person may be a genuine business person but has evaded tax.
Tax evasion
Tax evasion must be addressed effectively for a number of reasons. At first, it deprives states from raising sufficient revenues, therefore, preventing them from implementing social, economic, environmental, cultural and other policies. Tax evasion undermines the efforts of the government to promote the welfare and social cohesion; it prevents it from performing its social function. Moreover, it erodes the credibility of democratic institutions, while injuring the trust of citizens in the means and ends of a legitimate, democratic government. In a nutshell, it can brew feelings that might evolve into anti-social, anti-democratic mentalities.
Secondly, those who are in a better position to avoid taxation are the people who can siphon their income into foreign banks or jurisdictions, which usually means that they are better off. In avoiding their duties and responsibility vis-á-vis society and the state, the tax evaders are in effect placing a greater burden on those who eventually pay off the effective costs of taxation, who are in their majority, members of the lower and middle parts of the income distribution. As such tax evasion fosters or widens social inequality while it produces a de facto division of citizens between privileged and non-privileged.
Thirdly, tax evasion provides incentives to established financial institutions as well as authorities or politicians to engage in corrupt activities, in quest of their own enrichment or other benefits. Financial institutions/banks are interested in increasing their profits by making use of this stream of funds, even if that implies circumventing the existing rules5. Authorities may be enticed to turn a blind eye in this process, so that their own position in power may be consolidated.
What Processes should you have to have in Place
Customer due diligence
Suitable customer due diligence measures is the bedrock of anti-money laundering requirements and the first line of defense for any business. This means:-
1) identifying and verifying the customer’s identity using documents, data or information obtained from a reliable and independent source where applicable, identifying the beneficial owner and taking risk-based and adequate measures to verify their identity using government-issued identity document and tax record (PIN)
2) obtaining information on the purpose and intended nature of the business relationship conducting ongoing monitoring of the business relationship.
This ongoing monitoring should include:
Scrutiny of transactions undertaken throughout the business relationship. This is to ensure that transactions are consistent with the accountant’s knowledge of the client, the business and risk profile.
Ensuring that documentation, data or information held is kept up to date, and carefully filed in hard copy.
Stages of CDD
Information gathering -Verification, Risk assessment and Identification
Verification
Who is the client? • Who owns them? • What do they do? • What is their source of funds?
Can you describe their activities? • What will you be doing for them? • What is its legal structure?
Risk Assesment
Client risk
Service risk
Geographic risk
Sector risk
Delivery channel risk
Identification
What documents or other information do you need to demonstrate what you have been told is true?
What steps do you need to take or what information do you need to obtain to mitigate any specific risks that you have identified?
The identification phase requires the gathering of information about a client’s identity and the purpose of the intended business relationship. Appropriate identification information for an individual would include full name, date of birth and residential address. This can be collected from a range of sources, including the client. In the case of corporates and other organisations, identification also extends to establishing the identity of anyone who ultimately owns or controls the client. These people are the ‘ultimate beneficial owners’ (UBOs), and further guidance on how to deal with them can be found in paragraph 5.1.14.
The next stage of CDD is risk assessment. This should be performed in accordance with and must reflect the purpose, regularity, and duration of the business relationship, as well as the size of transactions.
Conclusion: Money laundering is a serious offense, hence vigilance is important, where you bank or invest your money, you will most likely have to disclose the source of the cash, so be careful as you transact with any person, who you have the slightest doubt. Do not accept to help a friend, in disguising source of funds, you would be personally liable.
The content of this bulletin is for informational purposes only. The content is not intended in any way to be a substitute for legal advice, in making decisions, and the authors and the entities affiliated with them are not responsible for any loss, resulting from acting on this information. This information is driven by announcement by the Central Bank of Kenya on the new currency notes and the ceasing of the current Kshs 1,000 note as legal tender by 1st October 2019 and the PROCEEDS OF CRIME AND ANTI-MONEYLAUNDERING ACT (CHAPTER 59B)
Bothe the Kindle edition and paperback editions are available to purchase above
Islamic finance (Capital Markets, Banking and Insurance) has emerged from a niche financial market to the mainstream of finance. The geographic market, clientele served, products base and volume of funds have grown significantly. Furthermore, the players have increased and now include not only pure Islamic institutions but also hybrid players (conventional bank with Islamic Finance windows). Therefore, not understanding the unique risks of the Islamic Finance model (risk sharing and risk pooling) can cause a failure of the model igniting a financial crises with a ripple effect on the Islamic faith. Hence, managing these unique risks is extremely important. This book would explore the subject of corporate risk management in the context of Islamic Financial Institutions, which are run on the Islamic legal and economic system, which prohibits Riba (interest), avoids Gharar (uncertainty), avoids Maysir (gambling or excessive speculation).
This is an awesome book for someone who has an interest in risk management practices in Islamic finance. It enables the reader to understand the foundations of Islamic finance and how this is embedded in risk management practices in Islamic finance, plus how these differ and are similar to risk management practices in conventional financial institutions.
In recent years, the United Nations – Sustainable Development Goals (SDG’s) have risen to the top of the development agenda, with an emphasis on a partnership approach between the financed and financier. Given the scale of the financial resources required to support the SDG’s, coupled with the strain on government budgets, the mobilization of financing through innovative instruments becomes imperative. Islamic finance, through the Maqasid al Sharia – Islamic moral economy values being the foundation for Islamic finance, where participatory modes of finance take centre stage.
Hence, the potential of the use of Islamic finance to support “Green” investments to finance the SDG’s this has been receiving increased attention. With recent issues of “Green” Sukuk to finance climate friendly projects, water and sanitation projects, clean energy projects.
This is enhanced by the rise of the class of Ethical Social Governance (ESG) friendly investor and investment manager, who will mobilise the funds for investing in green sustainable projects.
This is enhanced by the rise of the class of Ethical Social Governance (ESG) friendly investor and investment manager, who will mobilize the funds for investing in green sustainable projects.
It is in this melting pot of ESG, Islamic moral value-based financial products, and impact investing, where innovative participatory finance will fusion to enable funding for green sustainable projects to actualize the SDG’s, that this book is about.
The question in most people mind regarding Financial Reporting for Islamic Financial Institutions is which standards, my view is first the Financial reporting should be based on International Financial Reporting Standards (IFRS) or the appropriate national reporting standards if the Country it is incorporated follows National Standards (it is a no special consideration being an Islamic Financial Institutions), then the reporting should comply with the National Companies Act and Banking or Financial Services Act requirements, then only should the reporting being accordance with Accounting and Auditing Organisation for Islamic Financial Institution (AAOIF) http://aaoifi.com/?lang=en or Islamic Financial Services Board (IFSB) https://www.ifsb.org/. The reason behind this is the foundation of Islamic finance is the ethical values on which it is based on, which would not allow it to violate national laws. The guiding maxim being “hub ul watan minal imaan” loosely translated as “love of one’s country is part of faith”.However, there is need to have a common framework for accounting and financial reporting for Islamic Financial Institution’s (IFI’s) to demonstrate to the common users of general purpose financial statements that the entities they are associated with comply, in form and in substance, with the principles and rules of the Islamic Sharia (“Jurisprudence”) in their financial and other transactions.
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