Economy Profile of Kenya

Ease of Doing Business in Kenya

ease of doing business in kenya

Rankings on Doing Business topics – Kenya

rankings on doing business topics kenya

Topic Scores

topic scores kenya

Starting a Business

This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city.

To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators.

The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to legally start and formally operate a company (number)

  • Preregistration (for example, name verification or reservation, notarization)

  • Registration in the economy’s largest business city

  • Postregistration (for example, social security registration, company seal)

  • Obtaining approval from spouse to start a business or to leave the home to register the company

  • Obtaining any gender specific document for company registration and operation or national identification card

    Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day (2 procedures cannot start on the same day)

  • Procedures fully completed online are recorded as ½ day

  • Procedure is considered completed once final document is received

  • No prior contact with officials

    Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

  • No professional fees unless services required by law or commonly used in practice

    Paid-in minimum capital (% of income per capita)

  • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation

To make the data comparable across economies, several assumptions about the business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes.

The business:

-Is a limited liability company (or its legal equivalent). If there is more than one type of limited liability company in the economy, the limited liability form most common among domestic firms is chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office.

-Operates in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

-Performs general industrial or commercial activities such as the production or sale to the public of goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily polluting production processes.

-Does not qualify for investment incentives or any special benefits.

-Is 100% domestically owned.

-Has five business owners, none of whom is a legal entity. One business owner holds 30% of the company shares, two owners have 20% of shares each, and two owners have 15% of shares each.

-Is managed by one local director.

-Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals.

-Has start-up capital of 10 times income per capita.

-Has an estimated turnover of at least 100 times income per capita.

-Leases the commercial plant or offices and is not a proprietor of real estate.

-Has an annual lease for the office space equivalent to one income per capita.

-Is in an office space of approximately 929 square meters (10,000 square feet).

-Has a company deed that is 10 pages long.

The owners:

-Have reached the legal age of majority and are capable of making decisions as an adult. If there is no legal age of majority, they are assumed to be 30 years old.

-Are in good health and have no criminal record.

-Are married, the marriage is monogamous and registered with the authorities.

-Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population.

Starting a Business – Kenya

starting a business kenya

Figure – Starting a Business in Kenya – Score

figure starting a business in kenya score

Figure – Starting a Business in Kenya and comparator economies – Ranking and Score

figure starting a business in kenya and comparator economies ranking and score

Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators.

Figure – Starting a Business in Kenya – Procedure, Time and Cost

figure starting a business in kenya procedure time and cost

Details – Starting a Business in Kenya – Procedure, Time and Cost

1 Reserve a unique company name using the eCitizen Portal

Agency : Business Registration Service (eCitizen portal)

The name reservation is regulated by the Companies Act 2015 (Part V, Section 48). As of December 2016,the Business Registration Service has made it easier for applicants to reserve company names by making it mandatory to use the online name reservation system on eCitizen. Applicants can search and reserve company names online at https://ag.ecitizen.go.ke/index.php/forms/view?id=463. After an applicant submits the name search and reservation application, they make payment via mobile money and receive a confirmation of the name reservation within the same day.

The name is reserved for 30 days and can be extended to a maximum period of 60 days from the time of reservation.

2 Apply for company registration, PIN, NSSF and NHIF through the online eCitizen portal

Agency : Business Registration Service (eCitizen portal)

An applicant is required to submit the application for registration of a company on the eCitizen platform by entering details of the required information in the fields provided. The Applicant has an option of adopting the model Articles of Association provided under the Companies Act 2015. The applicant may also supplement or modify the model Articles of Association and provide these for purposes of registering the company.

Payment for the registration of the company is also made online using the stipulated payment methods that include mobile money payment, debit/credit/prepaid cards, local bank transfer and E-citizen agents. Once payment is made, the following forms are generated by the online system:

  1. Details of the First Directors, Secretary and Authorized Signatory of the Company-This form needs to be signed by all the first directors, secretary and authorized signatory of the company

  2. Form CR 2 (Memorandum and Articles of Association)-This form is to be signed by all the subscribers to the shares of the company

  3. Form CR 8 (Notice of Residential Address/Change of Address of Director of a Company)-This form is to be signed by the applicant

  4. Statement of Nominal Capital-This is to be signed by any of the first directors of the company. The forms should be downloaded and signed as required and scans of the signed forms should be uploaded into the system.

The application for registration of the company shall be considered complete when all the above mentioned forms are scanned back into the system. The application shall then be reviewed by the Registry officials and if it is in order, a Certificate of Incorporation together with an Official Search shall be generated online.

3 Register for VAT and Pay As You Earn (PAYE) Income Tax

Agency : Kenya Revenue Authority (KRA)

Companies must register for VAT and with the Pay As You Earn (PAYE) Income Tax.

2 days

no charge

Section 34 of the VAT Act 2013 requires that any person who in the course of a business has made or is expecting to make taxable supplies the value of which is KES 5,000,000 or more in any period of twelve months must be registered for VAT. Registration is conducted online through KRA online services portal;htt.www.kra.g.ke/portal. Once the company is registered, they are required by the VAT Law to display the registration certificate in a clearly visible place within the business premises. Failing to do so will result in a default penalty of Kenya shillings 20,000 and in addition the company shall be guilty of an offence and liable to a fine not exceeding Kenya shillings 200,000 or imprisonment for a term not exceeding two years, or both.

Under the Income Tax Act Cap 470, where a person has employees, they are required to deduct tax due from any remuneration paid to their employees (PAYE tax) and remit this to the Revenue Authority (KRA). All employers are thus required to register for PAYE once they have employees. The applications for VAT and PAYE can be both completed at the same time.

According to the Official Gazette Notice Legal 61 published April 2016, there is a flat fee of 10,000 shillings for new company incorporation. The fee for using the online system is currently 50 shillings and the fee for completing the check at the end of the incorporation process is 600 shillings.

14 days on average KES 10,000 (registration

fee) + KES 600 (CR2 or

company search fee) + KES 50 (convenience fee)

4 Apply for a unified business permit

Agency : Nairobi City County

The Nairobi City County has introduced the new unified business permit online in order to make it easier and simpler for applicants to obtain the unified business permit. The unified business permit consolidates 5 permits i.e. the single business permit, fire clearance certificate, advertising signage, health certificate and food hygiene into one permit. Applicants apply for a unified business permit online at, https://epayments.nairobi.go.ke/sbp/reg_new with an option to make payments online. An assessment of the payable fee for the trading licence can only be done at the agency. Only after the assessment has been done can an invoice be generated and paid online.

The applicant can also go in person to submit the application for the unified permit. The applicant

then obtains the provisional unified business permit and can display it at their business premises.

5 days

see procedure details

Cost:

KES 15,000 single business permit fee (varied fees based on the size, type of business and number of employees)

KES 200 for the application fee

KES 4,500 for the inter alia a Fire Clearance Certificate

5 Register with the National Industrial Training Authority (NITA)

Agency : National Industrial Training Authority (NITA)

Through Legal Notice No. 113 of 2007, it became a mandatory requirement for all employers to register and contribute to the industrial training levy (charged at KES 50 per employee per month).

The applicant must complete the application form and attach the necessary documents. The supporting documents are as follows:

  1. the employer’s KRA PIN Certificate; and

  2. the employer’s Certificate of Incorporation.

    There is no application fee for registration with NITA. The application and supporting documents are submitted to the NITA physically at the NITA headquarters in Nairobi. All documents submitted along with the application form shall be certified by NITA as true copies of originals.

  3. days, simultaneous no charge

6 Make a company seal

Agency : Seal maker

The requirement for companies to obtain a company seal has been made optional as a result of passing the Companies Act, 2015. However, in practice companies still get seals made. Seal makers request a copy of the certificate of incorporation in order to make a company seal.

7 Register the workplace with the Directorate of Occupational Safety and Health Services

Agency : Directorate of Occupational Safety and Health Services (DOSHS)

The purpose of the Occupational Safety and Health Act 2007 is to provide a legal framework to promote, stimulate and encourage high standards of safety and health in the workplace. As such employers must:

  • Prepare and, revise a written safety and health policy statement for the workplace giving consideration to the organisation and arrangements for carrying out that policy;

  • Notify employees any revision of the policy statement;

  • To establish a safety and health committee in the workplace where there are twenty or more persons employed in the workplace;

  • not to penalize an employee who is a member of a work place safety and health committee for doing anything in pursuit of safety and health;

A company must obtain a Certificate of Registration of a Workplace from the Directorate of Occupational Health and Safety Services in respect of each of the premises used by the company as a workplace.

2 days, simultaneous between KES 2,500 and

KES 3,500

1 day, simultaneous KES 5,000

Dealing with Construction Permits

This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information

What the indicators measure

Procedures to legally build a warehouse (number)

  • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates

  • Submitting all required notifications and receiving all necessary inspections

  • Obtaining utility connections for water and sewerage

  • Registering and selling the warehouse after its completion

Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule

  • Procedure is considered completed once final document is received

  • No prior contact with officials

    Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

    Building quality control index (0-15)

  • Quality of building regulations (0-2)

  • Quality control before construction (0-1)

  • Quality control during construction (0-3)

  • Quality control after construction (0-3)

  • Liability and insurance regimes (0-2)

  • Professional certifications (0-4)

To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used.

The construction company (BuildCo):

  • Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or topographical experts.

  • Owns the land on which the warehouse will be built and will sell the warehouse upon its completion.

    The warehouse:

  • Will be used for general storage activities, such as storage of books or stationery.

  • Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita.

  • Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further documentation or getting prior approvals from external agencies, these are counted as procedures.

  • Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements).

    The water and sewerage connections:

  • Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built.

  • Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 gallons) a day.

  • Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection.

Dealing with Construction Permits – Kenya

dealing with construction permits kenya

Figure – Dealing with Construction Permits in Kenya – Score

figure dealing with construction permits in kenya score

Figure – Dealing with Construction Permits in Kenya and comparator economies – Ranking and Score

DB 2020 Dealing with Construction Permits Score

figure dealing with construction permits in kenya and comparator economies ranking and score

Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators.

Figure – Dealing with Construction Permits in Kenya – Procedure, Time and Cost

figure dealing with construction permits in kenya procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Figure – Dealing with Construction Permits in Kenya and comparator economies – Measure of Quality

figure dealing with construction permits in kenya and comparator economies measure of quality

Details – Dealing with Construction Permits in Kenya – Procedure, Time and Cost

1 Obtain a survey plan from Survey Kenya

Agency : Survey Kenya

A survey plan from Survey of Kenya is a required document when applying for a building permit.

day KES 500

2 Obtain a project report from an environmental expert

Agency : Private Expert

Once the survey plan has been obtained, a licensed environmental expert must be hired to prepare a project report to be submitted to NEMA.

5 days KES 50,000

3 Obtain approval of the environmental impact study

Agency : National Environment Management Authority (NEMA)

Following the enactment of new Environmental Management and Co-ordination Act on February 27, 2009, companies now have to obtain approval of projects from the National Environment Management Authority. Projects of all risk categories are subject to approval and an environmental impact assessment (EIA), including the BuildCo warehouse. It takes 30 days on average. EIA fees has been eliminated effective from January 2017

30 days KES 10,000

4 Submit and obtain approval of the architectural plans

Agency : Nairobi City County – Development Control Section

The structural engineer submits all the structural and architectural drawings to be approved using an online platform https://ccn-ecp.or.ke/. The required documents to be submitted are the following:

  1. The proposed development;

  2. A survey plan from Survey of Kenya;

  3. Ownership documents

  4. Up-to-date rates payment receipts.

  5. Structural plans

The City Council will issue an invoice that must be paid, this can take up to 2—3 weeks to be obtained. The drawings are reviewed by all relevant departments simultaneously. Once the structural and architectural drawings are approved, they will be signed on by the governor of Nairobi. When all signatures have been obtained, the approved plans are scanned and uploaded in the system so that they can be retrieved by the architect.

On June 27, 2013 the Nairobi City County adopted the new Financial Act 2013 which became effective as of October 1, 2013. The Act modified the method of assessing the building permit fees and consolidated several costs into one. The building permit fee is now based on the size of the building. The Joint Building Council Rates provide the estimated cost per square meter which varies depending on the type of building (e.g. office block, residential, industrial complex, etc.).

For the Doing Business case study, the estimated cost is KES 21,000 / sq. m. The fees are as follows:

  1. Building plan approval fee: 1% of the estimated cost of construction

  2. Construction sign board fee: KES 25,000

  3. Application fee: KES 5,000

  4. Inspection of building file: KES 5,000

  5. Occupation certificate: KES 5,000

45 days KES 166,563

5 Submit and obtain approval of the structural plans

Agency : Nairobi City County – Development Control Section

When construction is about to commence, the Contractor will apply for a construction permit. However, with approved drawings construction may start while the application for a building permit is being processed.

BuildCo must have the following items approved: project plans, architectural drawings, location survey of property documents and others.

10 days no charge

Details – Dealing with Construction Permits in Kenya – Measure of Quality

Getting Electricity

This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to obtain an electricity connection (number)

  • Submitting all relevant documents and obtaining all necessary clearances and permits

  • Completing all required notifications and receiving all necessary inspections

  • Obtaining external installation works and possibly purchasing material for these works

  • Concluding any necessary supply contract and obtaining final supply

    Time required to complete each procedure (calendar days)

  • Is at least 1 calendar day

  • Each procedure starts on a separate day

  • Does not include time spent gathering information

  • Reflects the time spent in practice, with little follow-up and no prior contact with officials

    Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

  • Value added tax excluded

    The reliability of supply and transparency of tariffs index (0-8)

  • Duration and frequency of power outages (0–3)

  • Tools to monitor power outages (0–1)

  • Tools to restore power supply (0–1)

  • Regulatory monitoring of utilities’ performance (0–1)

  • Financial deterrents limiting outages (0–1)

  • Transparency and accessibility of tariffs (0–1)

    To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used.

    The warehouse:

    • Is owned by a local entrepreneur and is used for storage of goods.

    • Is located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

    • Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway.

    • Is a new construction and is being connected to electricity for the first time.

    • Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square feet). The plot of land on which it is built is 929 square meters (10,000 square feet).

      The electricity connection:

    • Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW).

    • Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more common in the area where the warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.

    • Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base.

      The monthly consumption:

    • It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh.

    • If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier.

    • Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used.

    Price of electricity (cents per kilowatt-hour)*

  • Price based on monthly bill for commercial warehouse in case study

*Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity.

image

Standardized Connection

Name of utility Kenya Power and Lighting Co. Ltd

Getting Electricity – Kenya

image

City Covered Nairobi

Price of electricity (US cents per kWh) 21.7

image

Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Procedures (number)

3

5.2

4.4

3 (28 Economies)

image

Cost (% of income per capita)

615.4

3,187.5

61.0

0.0 (3 Economies)

Time (days) 97 109.6 74.8 18 (3 Economies)

image

Figure – Getting Electricity in Kenya – Score

Reliability of supply and transparency of tariff index (0-8) 5 1.6 7.4 8 (26 Economies)

image

image

100.0

image

65.7

image

92.4

image

62.5

Procedures

Time

Cost

Reliability of supply and transparency of tariff index

Figure – Getting Electricity in Kenya and comparator economies – Ranking and Score

DB 2020 Getting Electricity Score

image

0 100

88.0: Mauritius (Rank: 28)

82.3: Rwanda (Rank: 59)

80.1: Kenya (Rank: 70)

78.3: Namibia (Rank: 76)

59.5: Botswana (Rank: 139)

50.4: Regional Average (Sub-Saharan Africa)

Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity.

Figure – Getting Electricity in Kenya – Procedure, Time and Cost

image

image

Time (days) Cost (% of income per capita)

image

700

Cost (% of income per capita)

600

80

500

Time (days)

60

400

40 300

200

20

100

0 0

1 2 3

Procedures (number)

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures

reflected here, see the summary below.

Figure – Getting Electricity in Kenya and comparator economies – Measure of Quality

image

6

6

6

5

1.6

0

7

6

Index score

5

4

3

2

1

0

Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan

Africa

Details – Getting Electricity in Kenya – Procedure, Time and Cost

image

No. Procedures Time to Complete Associated Costs

1 Submit application to Kenya Power and Lighting Company (KPLC) and await quotation

Agency : Kenya Power and Lighting Company Ltd The client submits the following documents:

  • Inquiry for supply of electricity form –Collected from KPLC and duly filled out

  • Copy of Certificate of registration

  • Copy of PIN Certificate

  • Sketch Map to the Premises

  • Permit from city council to show that the land is occupied legally and structure is correctly done and approved by city council

    KPLC locates the building using GIS technology and looks at some key aspects that determine the price estimate that the client will receive, and prepares estimate.

  • Amount of power required for the building.

  • Existing infrastructure (Poles and transformers) and their proximity to the premises. It is important to note that if the premise is within 600m of existing infrastructure, this considerably lowers the cost.

  • Way leaves clearance –Pathways for laying down infrastructure and any permits or notifications needed to facilitate this.

21 calendar days KES 0

2 Pay estimate and sign supply contract

Agency : Kenya Power and Lighting Company Ltd

Connection costs include capital contribution charges for network reinforcement for up to 1000 meters. Customer fills in the Supply Contract form and submits to the Meter Installation section through the customer service department. Customer also submits internal wiring clearance certificate from electrician.

1 calendar day KES 1,060,000

image

3 Receive external works, meter installation and electricity flow

Agency : Kenya Power and Lighting Company Ltd

External connection works are done by Distribution Department, and while reaching completion, they inform the Meter Installation Section in Customer Service Department to complete metering.

image

Takes place simultaneously with previous procedure.

75 calendar days KES 0

Details – Getting Electricity in Kenya – Measure of Quality

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Answer

Reliability of supply and transparency of tariff index (0-8) 5

System average interruption duration index (SAIDI) 12.0

Total duration and frequency of outages per customer a year (0-3) 1

What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 1.0

System average interruption frequency index (SAIFI) 6.9

Does the distribution utility use automated tools to monitor outages? Yes

Mechanisms for monitoring outages (0-1) 1

Does the distribution utility use automated tools to restore service? Yes

Mechanisms for restoring service (0-1) 1

Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes

Regulatory monitoring (0-1) 1

Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? No

Financial deterrents aimed at limiting outages (0-1) 0

Are effective tariffs available online? Yes

Communication of tariffs and tariff changes (0-1) 1

Link to the website, if available online https://kplc.co.ke/content/i

Are customers notified of a change in tariff ahead of the billing cycle? Yes

tem/691/electricity-tarrifs

Note:

If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index.

If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index.

Registering Property

This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to legally transfer title on immovable property (number)

  • Preregistration procedures (for example, checking for liens, notarizing sales agreement, paying property transfer taxes)

  • Registration procedures in the economy's largest business city.

  • Postregistration procedures (for example, filling title with municipality)

    Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day – though procedures that can be fully completed online are an exception to this rule

  • Procedure is considered completed once final document is received

  • No prior contact with officials

    Cost required to complete each procedure (% of property value)

  • Official costs only (such as administrative fees, duties and taxes).

  • Value Added Tax, Capital Gains Tax and illicit payments are excluded

    Quality of land administration index (0-30)

  • Reliability of infrastructure index (0-8)

  • Transparency of information index (0–6)

  • Geographic coverage index (0–8)

  • Land dispute resolution index (0–8)

  • Equal access to property rights index (-2–0)

To make the data comparable across economies, several assumptions about the parties to the transaction, the property and the procedures are used.

The parties (buyer and seller):

  • Are limited liability companies (or the legal equivalent).

  • Are located in the periurban (that is, on the outskirts of the city but still within its official limits) area of the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Are 100% domestically and privately owned.

  • Perform general commercial activities.

    The property (fully owned by the seller):

  • Has a value of 50 times income per capita, which equals the sale price.

  • Is fully owned by the seller.

  • Has no mortgages attached and has been under the same ownership for the past 10 years.

  • Is registered in the land registry or cadastre, or both, and is free of title disputes.

  • Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required.

  • Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its entirety.

  • Will not be subject to renovations or additional construction following the purchase.

  • Has no trees, natural water sources, natural reserves or historical monuments of any kind.

  • Will not be used for special purposes, and no special permits, such as for residential use, industrial plants, waste storage or certain types of agricultural activities, are required.

  • Has no occupants, and no other party holds a legal interest in it.

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Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Procedures (number)

10

6.1

4.7

1 (5 Economies)

Registering Property – Kenya

image

Cost (% of property value)

5.9

7.3

4.2

0.0 (Saudi Arabia)

Time (days) 43.5 51.6 23.6 1 (2 Economies)

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Figure – Registering Property in Kenya – Score

Quality of the land administration index (0-30) 15.0 9.0 23.2 None in 2018/19

image

image

25.0

image

79.7

image

60.5

image

50.0

Procedures

Time

Cost

Quality of the land administration index

Figure – Registering Property in Kenya and comparator economies – Ranking and Score

DB 2020 Registering Property Score

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0 100

93.7: Rwanda (Rank: 3)

82.5: Mauritius (Rank: 23)

65.8: Botswana (Rank: 82)

53.8: Kenya (Rank: 134)

53.6: Regional Average (Sub-Saharan Africa) 40.6: Namibia (Rank: 173)

Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators.

Figure – Registering Property in Kenya – Procedure, Time and Cost

image

image

image

Time (days) Cost (% of property value)

40

35

Time (days)

30

25

20

15

4.5

4

Cost (% of property value)

3.5

3

2.5

2

1.5

10 1

5 0.5

0 0

1 * 2 * 3 * 4 5 6 7 8 9 10

Procedures (number)

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Figure – Registering Property in Kenya and comparator economies – Measure of Quality

image

28.5

22.5

15.0

10.5

10.0

9.0

35

30

Index score

25

20

15

10

5

0

Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan

Africa

Details – Registering Property in Kenya – Procedure, Time and Cost

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No. Procedures Time to Complete Associated Costs

  1. Obtain Land Rent Clearance Certificate

    Agency : Lands Office (through ecitizen.go.ke)

    The seller's lawyer obtains the Land Rent Clearance Certificate from the lands office. It is possible to pay for any outstanding taxes and receive the clearance certificate through the e-Citizen online platform. Once the applicant paid all the taxes, the system will generate the Land Rent Clearance Certificate digitally.

    image

  2. Obtain Rates Clearance Certificate from the Nairobi City Council

    Agency : Nairobi City County Government

    The seller's lawyer obtains the Rates Clearance Certificate from the Nairobi City County Government. This certificate is important proof that there are no outstanding fees to be paid to the Nairobi City County Government.

    7 days no charge

    5 days KES 10,000

    image

  3. Draft the transfer instrument and file it at the Lands Office to obtain an appointment for valuation

    Agency : Lawyer's office

    The transfer instrument is prepared by the buyer’s lawyer and needs to be approved by the seller’s counterpart. Lawyers' fees are calculated based on a fixed scale published under the Advocates (Remuneration) Order depending on the value of the property. Lawyers are also permitted to charge on alternative billing methods subject to the minimum fees set out under the scaled provided for under the Advocates (Remuneration) Order.

    The transfer instrument is filed at the Land office to be assessed for Stamp duty.

    4 days KES 154,178.54;

    (According to the Advocates Remuneration Order for 2014 the lawyer's fee is calculated cumulatively, based on the property's value:

    1. from Kshs. 1 to Kshs. 5,000,000, 2% of the

      consideration or

      the value of the subject matter or Kshs. 35,000 whichever is

      higher.

    2. from Kshs. 5,000,001 to Kshs.100,000,000, the fee

      prescribed in (i) plus 1.5% of the balance.

    3. from Kshs.100,000,001 to Kshs. 250,000,000, the fee

      prescribed in (ii) plus 1.25

      % of the balance.

    4. from Kshs. 250,000,001 to Kshs.1,000,000,000, the

      fee

      prescribed in (iii) plus 1% of the balance

    5. in respect of an amount where the consideration or value is

      more than Kshs.1,000,000,000, the

      fee set out in (iv) plus 0.1% of the balance.)

      image

  4. Obtain an official search on the title at the Lands Office

Agency : Lands Office

Lawyers obtain an official title search.

For titles previously registered under the Registered Land Act (Cap. 300), it is possible to obtain the official search through the E-Citizen platform.

For titles issued under the Registration of Titles Act (Cap. 281) or the Government Lands Act (Cap. 280), an official search is obtained at the Lands Registry.

3 days KES 500; (KES 500

Nairobi Registry

KES 520 Nairobi Central Registry

KES 550 Online (E- Citizen) (KES 50 is the convenience fee for the E- Citizen portal))

5 Obtain consent to transfer from the Lands Office

Agency : Lands Office (through ecitizen.go.ke)

When the Constitution of Kenya, 2010 was promulgated, the Land Registration Act (No. 3 of 2012) repealed the Government Lands Act (Cap. 280). Under the Act, for leasehold lands held by the government, the consent to transfer is required to be obtained from the lands office.

The consent to transfer is requested through the E-Citizen portal. Once the applicant receives the notification from the lands office, they need to pick up the consent at the lands office.

5 days

KES 1,050

6 Receive site inspection by a government valuer and obtain a valuation report

Agency : Lands Office Valuer

Once the draft transfer has been filed at the land office, an inspector visits the site to verify the development and state of the property. Due to lack of transport, in practice, the inspector often has to be picked up in person and driven to the site. Previously, such inspections were conducted on a random basis, but now every transaction requires such an inspection. Once the valuer has inspected the property to assess its value, a report is compiled after which the value is endorsed on the transfer and then it is submitted for assessment of the Stamp duty.

20 days

no charge

7 Endorsement of value for stamp duty purposes and assessment of the stamp duty

Agency : Lands Office

The stamp duty assessment form is completed including the purchase price (in quadruplet). The stamp duty assessment officer stationed at the Ministry of Lands banking hall will then assess the stamp duty payable and indicate the amount on the forms. Stamping of the document takes on average 3 days.

4 days

no charge

8 Generate a payment slip of the stamp duty

Agency : Kenya Revenue Authority

Once the stamp duty has been assessed, the buyer generates a payment slip via the iTax portal. The iTax portal is used for generating slips for the payment to Kenya Revenue Authority. Once the payment slip has been generated, the payment can be made at commercial banks.

Less than one day, online

no charge

9 Payment of the stamp duty at Commercial Bank and receive confirmation of payment from the Kenya Revenue Authority

Agency : Commercial Bank

The payment of Stamp Duty is made at commercial banks designated by the Ministry of Land. If the amount exceeds KSE 1 million, payment is made by RTGS bank transfer. It takes about 2 days for the Kenya Revenue Authority to confirm receipt of payment after which the transfer agreement can be franked or embossed evidencing payment of stamp duty.

2 days

KES 344,586.15; (KES

110 (charge for Banker’s check) + 4% of property value (stamp Duty))

10 Lodge stamped transfer document for registration and receive duly registered documents

Agency : Lands Office

5 days

KES 500

The stamped transfer documents are lodged for registration at the lands office. These documents

are generally obtained from seller’s lawyers. The documents include the original Certificate of

Title, Rates Clearance Certificate, Land Rent Clearance Certificate, and the Consent to Transfer.

The balance of the purchase price is also paid. The certificate of the registered transfer is

collected at the Lands Office.

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Takes place simultaneously with previous procedure.

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Details – Registering Property in Kenya – Measure of Quality

Answer

Score

Quality of the land administration index (0-30)

15.0

Reliability of infrastructure index (0-8)

7.0

Type of land registration system in the economy:

Dual system (Title & Deed)

What is the institution in charge of immovable property registration?

Lands Office

In what format are past and newly issued land records kept at the immovable property registry of the largest business city of the economy —in a paper format or in a computerized format (scanned or fully digital)?

Computer/Fully digital

2.0

Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, restrictions and the like)?

Yes

1.0

Institution in charge of the plans showing legal boundaries in the largest business city:

Survey of Kenya

In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business city of the economy—in a paper format or in a computerized format (scanned or fully digital)?

Computer/Fully digital

2.0

Is there an electronic database for recording boundaries, checking plans and providing cadastral information (geographic information system)?

Yes

1.0

Is the information recorded by the immovable property registration agency and the cadastral or mapping agency kept in a single database, in different but linked databases or in separate databases?

Separate databases

0.0

Do the immovable property registration agency and cadastral or mapping agency use the same identification number for properties?

Yes

1.0

Transparency of information index (0–6)

3.0

Who is able to obtain information on land ownership at the agency in charge of immovable property registration in the largest business city?

Only intermediaries and interested parties

0.0

Is the list of documents that are required to complete any type of property transaction made publicly available– and if so, how?

Yes, online

0.5

Link for online access:

http://www.lands.go.k e/wp- content/uploads/2018

/03/Registration-of- transfer-of-Land- revised.pdf

Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable property registration in the largest business city made publicly available–and if so, how?

Yes, online

0.5

Link for online access:

http://www.lands.go.k e/wp- content/uploads/2018

/03/Registration-of- transfer-of-Land- revised.pdf

Does the agency in charge of immovable property registration agency formally commit to deliver a legally binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard?

Yes, online

0.5

Link for online access:

http://lands.go.ke/wp- content/uploads/2018

/03/Registration-of- transfer-of-Land- revised.pdf

Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency in charge of immovable property registration?

No

0.0

Contact information:

Are there publicly available official statistics tracking the number of transactions at the immovable property registration agency?

No

0.0

Number of property transfers in the largest business city in 2018:

Page 28

Who is able to consult maps of land plots in the largest business city?

Anyone who pays the official fee

0.5

Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how?

Yes, online

0.5

Link for online access:

http://www.kpda.or.ke

/documents/Charters/ Ministry%20of%20La nds%20and%20Physi cal%20Planning%20 Service%20Charter.p df

Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and if so, how does it communicate the service standard?

Yes, online

0.5

Link for online access:

http://www.kpda.or.ke

/documents/Charters/ Ministry%20of%20La nds%20and%20Physi cal%20Planning%20 Service%20Charter.p df

Is there a specific and independent mechanism for filing complaints about a problem that occurred at the cadastral or mapping agency?

No

0.0

Contact information:

Geographic coverage index (0–8)

0.0

Are all privately held land plots in the largest business city formally registered at the immovable property registry?

No

0.0

Are all privately held land plots in the economy formally registered at the immovable property registry?

No

0.0

Are all privately held land plots in the largest business city mapped?

No

0.0

Are all privately held land plots in the economy mapped?

No

0.0

Land dispute resolution index (0–8)

5.0

Does the law require that all property sale transactions be registered at the immovable property registry to make them opposable to third parties?

Yes

1.5

Legal basis:

Land Registration Act, 2012,

Registration of Titles Act cap 281, Government Land Act cap 280, Land Titles Act 282.

Is the system of immovable property registration subject to a state or private guarantee?

Yes

0.5

Type of guarantee:

State guarantee

Legal basis:

Registration of Titles Act cap 281, Government Land Act cap 280, Land Titles Act 282.

Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry?

No

0.0

Legal basis:

Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., checking the compliance of contracts with requirements of the law)?

Yes

0.5

If yes, who is responsible for checking the legality of the documents?

Registrar; Notary; Lawyer;

Does the legal system require verification of the identity of the parties to a property transaction?

Yes

0.5

If yes, who is responsible for verifying the identity of the parties?

Registrar; Notary; Lawyer;

Is there a national database to verify the accuracy of government issued identity documents?

Yes

1.0

What is the Court of first instance in charge of a case involving a standard land dispute between two local businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located in the largest business city?

Environment and Land Court

How long does it take on average to obtain a decision from the first-instance court for such a case (without appeal)?

Between 2 and 3 years

1.0

Are there publicly available statistics on the number of land disputes at the economy level in the first instance court?

No

0.0

Number of land disputes in the economy in 2018:

Equal access to property rights index (-2–0)

0.0

Do unmarried men and unmarried women have equal ownership rights to property?

Yes

Do married men and married women have equal ownership rights to property?

Yes

0.0

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Getting Credit

This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

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What the indicators measure

Case study assumptions

Strength of legal rights index (0–12)

  • Rights of borrowers and lenders through collateral laws (0-10)

  • Protection of secured creditors’ rights through bankruptcy laws (0-2)

    Depth of credit information index (0–8)

  • Scope and accessibility of credit information distributed by credit bureaus and credit registries (0-8)

    Credit bureau coverage (% of adults)

  • Number of individuals and firms listed in largest credit bureau as a percentage of adult population

    Credit registry coverage (% of adults)

  • Number of individuals and firms listed in credit registry as a percentage of adult population

Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit information index measures rules and practices affecting the coverage, scope and accessibility of credit information available through a credit registry or a credit bureau. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary secured transactions system exists. Then two case scenarios, case A and case B, are used to determine how a nonpossessory security interest is created, publicized and enforced according to the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a secured lender, BizBank.

In some economies the legal framework for secured transactions will allow only case A or case B (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral.

Several assumptions about the secured borrower (ABC) and lender (BizBank) are used:

  • ABC is a domestic limited liability company (or its legal equivalent).

  • ABC has up to 50 employees.

  • ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Both ABC and BizBank are 100% domestically owned.

The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests).

In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets.

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Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Strength of legal rights index (0-12)

11

5.1

6.1

12 (5 Economies)

Getting Credit – Kenya

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Credit registry coverage (% of adults)

0.0

8.3

24.4

100.0 (2 Economies)

Depth of credit information index (0-8) 8 3.9 6.8 8 (53 Economies)

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Figure – Getting Credit in Kenya – Score

image

95.0

Credit bureau coverage (% of adults) 36.4 11.0 66.7 100.0 (14 Economies)

image

Score – Getting Credit

Figure – Getting Credit in Kenya and comparator economies – Ranking and Score

DB 2020 Getting Credit Score

image

0 100

95.0: Kenya (Rank: 4)

95.0: Rwanda (Rank: 4)

65.0: Mauritius (Rank: 67)

60.0: Botswana (Rank: 80)

60.0: Namibia (Rank: 80)

45.2: Regional Average (Sub-Saharan Africa)

Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index.

Figure – Legal Rights in Kenya and comparator economies

image

11

11

6

5

5

5.1

12

10

Index Score

8

6

4

2

0

Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan

Africa

Details – Legal Rights in Kenya

image

Strength of legal rights index (0-12) 11

image

Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description

of collateral?

Yes

Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable assets exist in the economy?

Yes

image

May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the

original assets?

Yes

Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of collateral?

Yes

image

Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an

electronic database indexed by debtor's name?

Yes

Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered?

Yes

Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes

Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third Yes party?

Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? Yes

Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes

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Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt?

Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it?

Figure – Credit Information in Kenya and comparator economies

image

8

8

7 7 7

3.9

9

8

Index Score

7

6

5

4

3

2

1

0

Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan

Africa

image

Details – Credit Information in Kenya

image

Depth of credit information index (0-8)

Credit bureau

Credit registry

Score

Are data on both firms and individuals distributed?

Yes

No

1

image

Are data from retailers or utility companies – in addition to data from banks and

financial institutions – distributed?

Yes

No

1

Are both positive and negative credit data distributed? Yes No 1

image

Are data on loan amounts below 1% of income per capita distributed?

Yes

No

1

Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.)

Yes No 1

By law, do borrowers have the right to access their data in the credit bureau or credit registry?

Yes No 1

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Can banks and financial institutions access borrowers’ credit information online (for example, through an online platform, a system-to-system connection or both)?

Yes No 1

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Are bureau or registry credit scores offered as a value-added service to help banks and financial institutions assess the creditworthiness of borrowers?

Yes No 1

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Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0.

Coverage

Credit bureau

Credit registry

Number of individuals

10,380,120

0

Number of firms

330,782

0

Total

10,710,902

0

Percentage of adult population

36.4

0.0

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Protecting Minority Investors

This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

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What the indicators measure

Case study assumptions

  • Extent of disclosure index (0–10): Disclosure, review, and approval requirements for related-party transactions

  • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for prejudicial related-party transactions; Available legal remedies (damages, disgorgement of profits, disqualification

    from managerial position(s) for one year or more, rescission of the transaction)

  • Ease of shareholder suits index (0–10): Access to internal corporate documents; Evidence obtainable during trial and allocation of legal expenses

  • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of shareholder suits indices

  • Extent of shareholder rights index (0-6): Shareholders’ rights and role in major corporate decisions

  • Extent of ownership and control index (0-7): Governance safeguards protecting shareholders from undue board control and entrenchment

  • Extent of corporate transparency index (0-7): Corporate transparency on ownership stakes, compensation, audits and financial prospects

  • Extent of shareholder governance index (0–20): Sum of the extent of shareholders rights, extent of ownership and control and extent of corporate transparency indices

  • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices

To make the data comparable across economies, a case study uses several assumptions about the business and the transaction.

The business (Buyer):

  • Is a publicly traded corporation listed on the economy’s most important stock exchange.

  • Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not specifically required by law.

  • Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members.

  • Has not adopted bylaws or articles of association that go beyond the minimum requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory.

  • Is a manufacturing company with its own distribution network.

    The transaction involves the following details:

  • Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to Buyer’s five-member board.

  • Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores.

  • Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.

  • The proposed transaction is part of the company’s principal activity and is not outside the authority of the company.

  • Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently.

  • The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and directors that approved the transaction.

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Protecting Minority Investors – Kenya

Stock exchange information

Stock exchange

Nairobi Stock Exchange

Stock exchange URL

http://www.nse.co.ke

Listed firms with equity securities

64

City Covered

Nairobi

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Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Extent of disclosure index (0-10)

10.0

5.5

6.5

10 (13 Economies)

Extent of director liability index (0-10)

10.0

3.5

5.3

10 (3 Economies)

Ease of shareholder suits index (0-10)

9.0

5.5

7.3

10 (Djibouti)

Extent of shareholder rights index (0-6)

6.0

1.8

4.7

6 (19 Economies)

Extent of ownership and control index (0-7)

6.0

1.4

4.5

7 (9 Economies)

Extent of corporate transparency index (0-7)

5.0

1.5

5.7

7 (13 Economies)

Figure – Protecting Minority in Kenya – Score

image

92.0

Score – Protecting Minority Investors

Figure – Protecting Minority Investors in Kenya and comparator economies – Ranking and Score

DB 2020 Protecting Minority Investors Score

image

0 100

92.0: Kenya (Rank: 1)

78.0: Mauritius (Rank: 18)

60.0: Botswana (Rank: 72)

56.0: Namibia (Rank: 88)

44.0: Rwanda (Rank: 114)

38.5: Regional Average (Sub-Saharan Africa)

Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index.

Figure – Protecting Minority Investors in Kenya and comparator economies – Measure of Quality

Kenya

Botswana

Mauritius

Namibia

Rwanda

OECD high income

Sub-Saharan Africa

image

image

5

10

10

6

6

9

5

8

7

3

4

3

5

8

7

5

5

9

6

5

5

3

3

6

0

9

8

0

5

5.6

5.6

6.6

4.3

4.5

7.4

1.7

3.6

5.6

1.5 1.9

5.6

0 5 10 15 20 25 30 35 40 45 50

Sub-Indicator Score

image

image

image

image

image

image

Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10)

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Details – Protecting Minority Investors in Kenya – Measure of Quality

Answer

Score

Extent of conflict of interest regulation index (0-30)

Extent of disclosure index (0-10)

10.0

Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3)

Shareholders excluding interested parties

3.0

Must an external body review the terms of the transaction before it takes place? (0-1)

Yes

1.0

Must Mr. James disclose his conflict of interest to the board of directors? (0-2)

Full disclosure of all material facts

2.0

Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2)

Disclosure on the transaction and on the conflict of interest

2.0

Must Buyer immediately disclose the transaction to the public? (0-2)

Disclosure on the transaction and on the conflict of interest

2.0

Extent of director liability index (0-10)

10.0

Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Buyer? (0-1)

Yes

1.0

Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2)

Liable if unfair or prejudicial

2.0

Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2)

Liable if unfair or prejudicial

2.0

Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1)

Yes

1.0

Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1)

Yes

1.0

Is Mr. James disqualified upon a successful claim by shareholders? (0-1)

Yes

1.0

Can a court void the transaction upon a successful claim by shareholders? (0-2)

Voidable if unfair or prejudicial

2.0

Ease of shareholder suits index (0-10)

9.0

Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? (0-1)

Yes

1.0

Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3)

Any relevant document

3.0

Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1)

Yes

1.0

Can the plaintiff directly question the defendant and witnesses at trial? (0-2)

Yes

2.0

Is the level of proof required for civil suits lower than that of criminal cases? (0-1)

Yes

1.0

Can shareholder plaintiffs recover their legal expenses from the company? (0-2)

Yes if successful

1.0

Extent of shareholder governance index (0-20)

Extent of shareholder rights index (0-6)

6.0

Does the sale of 51% of Buyer's assets require shareholder approval?

Yes

1.0

Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders?

Yes

1.0

Must Buyer obtain its shareholders’ approval every time it issues new shares?

Yes

1.0

Do shareholders automatically receive preemption rights every time Buyer issues new shares?

Yes

1.0

Do shareholders elect and dismiss the external auditor?

Yes

1.0

Are changes to the rights of a class of shares only possible if the holders of the affected shares approve?

Yes

1.0

Extent of ownership and control index (0-7)

6.0

Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors?

Yes

1.0

Must the board of directors include independent and nonexecutive board members?

Yes

1.0

Can shareholders remove members of the board of directors without cause before the end of their term?

Yes

1.0

Must the board of directors include a separate audit committee exclusively comprising board members?

Yes

1.0

Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer?

No

0.0

Must Buyer pay declared dividends within a maximum period set by law?

Yes

1.0

Is a subsidiary prohibited from acquiring shares issued by its parent company?

Yes

1.0

Extent of corporate transparency index (0-7)

5.0

Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%?

Yes

1.0

Must Buyer disclose information about board members’ primary employment and directorships in other companies?

Yes

1.0

Must Buyer disclose the compensation of individual managers?

No

0.0

Must a detailed notice of general meeting be sent 21 days before the meeting?

Yes

1.0

Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda?

No

0.0

Must Buyer's annual financial statements be audited by an external auditor?

Yes

1.0

Must Buyer disclose its audit reports to the public?

Yes

1.0

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Paying Taxes

This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information.

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What the indicators measure

Case study assumptions

Tax payments for a manufacturing company in 2018 (number per year adjusted for electronic and joint filing and payment)

  • Total number of taxes and contributions paid or withheld, including consumption taxes (value added tax, sales tax or goods and service tax)

  • Method and frequency of filing and payment

    Time required to comply with 3 major taxes (hours per year)

  • Collecting information, computing tax payable

  • Preparing separate tax accounting books, if required

  • Completing tax return, filing with agencies

  • Arranging payment or withholding

    Total tax and contribution rate (% of commercial profits)

  • Profit or corporate income tax

  • Social contributions, labor taxes paid by employer

  • Property and property transfer taxes

  • Dividend, capital gains, financial transactions taxes

  • Waste collection, vehicle, road and other taxes

    Postfiling Index

  • Time to comply with VAT refund (hours)

  • Time to obtain VAT refund (weeks)

  • Time to comply with a corporate income tax correction (hours)

  • Time to complete a corporate income tax correction (weeks)

Using a case scenario, Doing Business records taxes and mandatory contributions a medium size company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax laws, time taken to comply with the requirements of postfiling processes and time waiting.

To make data comparable across economies, several assumptions are used:

  • TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government.

    The VAT refund process:

  • In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output VAT in June 2018.

    The corporate income tax audit process:

  • An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period.

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Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Payments (number per year)

24

36.6

10.3

3 (2 Economies)

Paying Taxes – Kenya

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Total tax and contribution rate (% of profit)

37.2

47.3

39.9

26.1 (33 Economies)

Time (hours per year) 180 280.6 158.8 49 (3 Economies)

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Figure – Paying Taxes in Kenya – Score

Postfiling index (0-100) 62.0 54.7 86.7 None in 2018/19

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image

65.0

image

79.8

image

84.3

image

62.0

Payments

Time

Total tax and contribution rate

Postfiling index

Figure – Paying Taxes in Kenya and comparator economies – Ranking and Score

DB 2020 Paying Taxes Score

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0 100

94.0: Mauritius (Rank: 5)

84.6: Rwanda (Rank: 38)

80.0: Botswana (Rank: 59)

74.5: Namibia (Rank: 88)

72.8: Kenya (Rank: 94)

57.8: Regional Average (Sub-Saharan Africa)

Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold.

Figure – Paying Taxes in Kenya and comparator economies – Measure of Quality

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98.3

82.7

77.2

62.0

64.6

54.7

120

100

Index score

80

60

40

20

0

Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan

Africa

Details – Paying Taxes in Kenya

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Tax or Payments

mandatory (number) contribution

Notes on Payments

Time (hours)

Statutory tax rate

Tax base

Total tax and contribution rate (% of profit)

Notes on TTCR

Corporate 1.0

income tax

online

41.5

30%

taxable profit

29.88

Standards levy 1.0

online

0.2%

net sales

3.54

Employer paid – 1.0

Social security contributions (NSSF)

online

63.0

5% up to KES200 per

person per month

gross salaries

1.52

Unified Business 1.0 Permit

KES 100,000

fixed fee

1.06

Tax on interest 0.0

jointly

15%

interest income

0.38

included in other taxes

Employer paid – 12.0

Training or apprentice tax

KES 50 per employee per month

number of employees

0.38

Land rates 1.0

0.6%

land value

0.30

Road 0.0

maintenance levy

jointly

KES 9 per liter

fuel consumption

0.28

Capital Gains Tax 1.0

5%

capital gains

0.25

Advance motor 1.0

vehicle tax

KES 1,500 per

ton

vehicle weight

0.24

included in other taxes

Land rent 1.0

various rates

0.01

Petroleum 0.0

development duty

jointly

KES 0.4 per liter

fuel consumption

0.01

Tax on check 1.0

transactions

KES 2 per check

number of checks

0.01

Stamp duty on 1.0

contracts

various rates

type of contract

0.00

small amount

Value added tax 1.0

(VAT)

online

75.0

16%

value added

0.00

not included

Fuel tax – excise 1.0

duty

KES 10.31 per

liter

fuel consumption

0.00

small amount

Employee paid – 0.0

National hospital insurance fund (NHIF)

jointly

various rates

gross salaries

0.00

withheld

Employee paid – 0.0

Social security contributions (NSSF)

jointly

5% up to KES 200 per person per month

gross salaries

0.00

withheld

Totals 24

180

37.2

Details – Paying Taxes in Kenya – Tax by Type

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Taxes by type

Answer

Profit tax (% of profit)

30.1

Labor tax and contributions (% of profit)

1.9

Other taxes (% of profit)

5.2

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Details – Paying Taxes in Kenya – Measure of Quality

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Answer

Score

Postfiling index (0-100)

62.0

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Does VAT exist?

Yes

VAT refunds

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Restrictions on VAT refund process

none

Does a VAT refund process exist per the case study? No, industrial machine is exempted from VAT

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Is there a mandatory carry forward period?

No

Percentage of cases exposed to a VAT audit (%) Not applicable

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Time to obtain VAT refund (weeks)

No VAT

No VAT

Time to comply with VAT refund (hours) No VAT No VAT

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Does corporate income tax exist?

Yes

Corporate income tax audits

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Time to comply with a corporate income tax correction (hours)

20.5

65.1

Percentage of cases exposed to a corporate income tax audit (%) 25% – 49%

Time to complete a corporate income tax correction (weeks) 13.1 58.9

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Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable.

The hours for Social Security include all the hours for labor taxes and mandatory contributions in general.

The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction.

N/A = Not applicable.

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Trading across Borders

Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

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What the indicators measure

Case study assumptions

Documentary compliance

  • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in origin economy

  • Obtaining, preparing and submitting documents required by destination economy and any transit economies

  • Covers all documents required by law and in practice, including electronic submissions of information

    Border compliance

  • Customs clearance and inspections

  • Inspections by other agencies (if applied to more than 20% of shipments)

  • Handling and inspections that take place at the economy’s port or border

    Domestic transport

  • Loading or unloading of the shipment at the warehouse or port/border

  • Transport between warehouse and port/border

  • Traffic delays and road police checks while shipment is en route

To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions:

Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours.

Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector experts in international trade logistics and are informed about exchange rates.

Assumptions of the case study:

  • For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy.

  • It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from its natural import partner—the economy from which it imports the largest value (price times quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000.

  • The mode of transport is the one most widely used for the chosen export or import product and the trading partner, as is the seaport or land border crossing.

  • All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process.

  • A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy.

  • Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities.

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Trading across Borders – Kenya

Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Time to export: Border compliance (hours)

16

97.1

12.7

1 (19 Economies)

Cost to export: Border compliance (USD)

143

603.1

136.8

0 (19 Economies)

Time to export: Documentary compliance (hours)

19

71.9

2.3

1 (26 Economies)

Cost to export: Documentary compliance (USD)

191

172.5

33.4

0 (20 Economies)

Time to import: Border compliance (hours)

194

126.2

8.5

1 (25 Economies)

Cost to import: Border compliance (USD)

833

690.6

98.1

0 (28 Economies)

Time to import: Documentary compliance (hours)

60

96.1

3.4

1 (30 Economies)

Cost to import: Documentary compliance (USD)

115

287.2

23.5

0 (30 Economies)

Figure – Trading across Borders in Kenya – Score

Time

Cost

Time

Cost

Time

Cost

Time

Cost

to

to

to

to

to

to

to

to

export:

export:

export:

export:

import:

import:

import:

import:

Border

Border

Documentary

Documentary

Border

Border

Documentary

Documentary

compliance

compliance

compliance

compliance

compliance

compliance

compliance

compliance

Figure – Trading across Borders in Kenya and comparator economies – Ranking and Score

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90.9

image

86.6

image

89.3

image

52.4

image

30.8

image

30.6

image

75.3

image

83.6

DB 2020 Trading Across Borders Score

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0 100

86.7: Botswana (Rank: 55)

81.0: Mauritius (Rank: 72)

75.0: Rwanda (Rank: 88)

67.4: Kenya (Rank: 117)

61.5: Namibia (Rank: 138)

53.6: Regional Average (Sub-Saharan Africa)

Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import.

Figure – Trading across Borders in Kenya – Time and Cost

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833

194

143

191

60

16

19

115

image

250

Time (hours)

200

150

100

50

0

Export

image

Export

Time (hours) Cost (USD)

Import

Import

900

800

Cost (USD)

700

600

500

400

300

200

100

0

Border Compliance

Documentary Compliance

Border Compliance

Documentary Compliance

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Details – Trading across Borders in Kenya

image

Characteristics

Export

Import

Product

HS 09 : Coffee, tea, matï and spices

HS 8708: Parts and accessories of motor vehicles

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Border

Malaba border crossing

Mombasa port

Trade partner Uganda Japan

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Domestic transport time (hours)

9

7

Distance (km) 440 481

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Domestic transport cost (USD) 967 1100

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Details – Trading across Borders in Kenya – Components of Border Compliance

Time to Complete (hours)

Associated Costs (USD)

Export: Clearance and inspections required by customs authorities

11.0

122.5

Export: Clearance and inspections required by agencies other than customs

4.5

20.0

Export: Port or border handling

2.0

0.0

Import: Clearance and inspections required by customs authorities

84.0

200.0

Import: Clearance and inspections required by agencies other than customs

72.0

250.0

Import: Port or border handling

38.0

382.5

Details – Trading across Borders in Kenya – Trade Documents

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Export

Import

Inland Bill of lading Bill of lading

Release order Cargo release order

Certificate of origin (COMESA) Pre-Import Verification of Conformity (PVoC)

Commercial invoice Commercial invoice

Exit note Import Declaration Form (IDF Form C-61)

Certificate of export Packing list

Export Declaration Proof of payments of Customs Duties

Packing list Terminal handling receipts

Phytosanitary certificate Declaration of customs value (Form C- 52)

SOLAS certificate

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Enforcing Contracts

The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information.

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What the indicators measure

Case study assumptions

Time required to enforce a contract through the courts (calendar days)

  • Time to file and serve the case

  • Time for trial and to obtain the judgment

  • Time to enforce the judgment

    Cost required to enforce a contract through the courts (% of claim value)

  • Average attorney fees

  • Court costs

  • Enforcement costs

    Quality of judicial processes index (0-18)

  • Court structure and proceedings (-1-5)

  • Case management (0-6)

  • Court automation (0-4)

  • Alternative dispute resolution (0-3)

The dispute in the case study involves the breach of a sales contract between two domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement.

To make the data on the time and comparable across economies, several assumptions about the case are used:

  • The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of adequate quality.

  • The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater.

  • The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater.

  • The Seller requests the pretrial attachment of the defendant’s movable assets to secure the claim.

  • The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods was not adequate.

  • The judge decides in favor of the seller; there is no appeal.

  • The Seller enforces the judgment through a public sale of the Buyer’s movable assets.

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Standardized Case

Claim value

KES 536,577

Enforcing Contracts – Kenya

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City Covered

Nairobi

Court name Nairobi Resident Magistrates Court

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Figure – Enforcing Contracts in Kenya – Score

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Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Time (days)

465

654.9

589.6

120 (Singapore)

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Quality of judicial processes index (0-18)

9.0

6.9

11.7

None in 2018/19

Cost (% of claim value) 41.8 41.6 21.5 0.1 (Bhutan)

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71.7

image

53.1

image

50.0

Time

Cost

Quality of judicial processes index

Figure – Enforcing Contracts in Kenya and comparator economies – Ranking and Score

DB 2020 Enforcing Contracts Score

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72.2: Mauritius (Rank: 20)

69.1: Rwanda (Rank: 32)

63.4: Namibia (Rank: 64)

58.3: Kenya (Rank: 89)

50.0: Botswana (Rank: 137)

49.6: Regional Average (Sub-Saharan Africa)

0 100

Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators.

Figure – Enforcing Contracts in Kenya – Time and Cost

700

600

Time (days)

500

400

300

200

100

0

Time (days) Cost (% of claim value)

image

660

64.6

654.9

589.6

465

490

460

39.8

41.8

41.6

35.8

25.0

21.5

230

image

image

Botswana Kenya Mauritius Namibia OECD

high income

70

Cost (% of claim value)

60

50

40

30

20

10

0

Rwanda Sub-Saharan Africa

Figure – Enforcing Contracts in Kenya and comparator economies – Measure of Quality

Kenya

Botswana

Mauritius

Namibia

Rwanda

OECD high income

Sub-Saharan Africa

image

image

2

2

0.5

4.5

2

2.5

0

2.5

2.5

3

3

5

2

5

2

1.5

2.5

5

4

4.5

2.5

3.2

2.4

3.6

2.2

1.3 0.3

3.2

0 2 4 6 8 10 12 14 16 18

Sub-Indicator Score

image

image

image

image

Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5)

Details – Enforcing Contracts in Kenya

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Indicator

Time (days) 465

Trial and judgment 365

Filing and service 40

Cost (% of claim value) 41.8

Enforcement of judgment 60

Court fees 11.6

Attorney fees 27.5

Quality of judicial processes index (0-18) 9.0

Enforcement fees 2.7

Case management (0-6) 2.0

Court structure and proceedings (-1-5) 4.5

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Alternative dispute resolution (0-3) 2.0

Court automation (0-4) 0.5

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Details – Enforcing Contracts in Kenya – Measure of Quality

Answer

Score

Quality of judicial processes index (0-18)

9.0

Court structure and proceedings (-1-5)

4.5

1. Is there a court or division of a court dedicated solely to hearing commercial cases?

Yes

1.5

2. Small claims court

1.5

2.a. Is there a small claims court or a fast-track procedure for small claims?

Yes

2.b. If yes, is self-representation allowed?

Yes

3. Is pretrial attachment available?

Yes

1.0

4. Are new cases assigned randomly to judges?

Yes, but manual

0.5

5. Does a woman's testimony carry the same evidentiary weight in court as a man's?

Yes

0.0

Case management (0-6)

2.0

1. Time standards

1.0

1.a. Are there laws setting overall time standards for key court events in a civil case?

Yes

1.b. If yes, are the time standards set for at least three court events?

Yes

1.c. Are these time standards respected in more than 50% of cases?

Yes

2. Adjournments

0.0

2.a. Does the law regulate the maximum number of adjournments that can be granted?

No

2.b. Are adjournments limited to unforeseen and exceptional circumstances?

No

2.c. If rules on adjournments exist, are they respected in more than 50% of cases?

n.a.

3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report?

No

0.0

4. Is a pretrial conference among the case management techniques used before the competent court?

Yes

1.0

5. Are there any electronic case management tools in place within the competent court for use by judges?

No

0.0

6. Are there any electronic case management tools in place within the competent court for use by lawyers?

No

0.0

Court automation (0-4)

0.5

1. Can the initial complaint be filed electronically through a dedicated platform within the competent court?

No

0.0

2. Is it possible to carry out service of process electronically for claims filed before the competent court?

No

0.0

3. Can court fees be paid electronically within the competent court?

No

0.0

4. Publication of judgments

0.5

4.a Are judgments rendered in commercial cases at all levels made available to the general public through publication in official gazettes, in newspapers or on the internet or court website?

No

4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website?

Yes

Alternative dispute resolution (0-3)

2.0

1. Arbitration

1.5

1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects?

Yes

1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— that cannot be submitted to arbitration?

No

1.c. Are valid arbitration clauses or agreements usually enforced by the courts?

Yes

2. Mediation/Conciliation 0.5

image

2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or

section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig

No

2.a. Is voluntary mediation or conciliation available? Yes

2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)?

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Resolving Insolvency

Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information.

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What the indicators measure

Case study assumptions

Time required to recover debt (years)

  • Measured in calendar years

  • Appeals and requests for extension are included

    Cost required to recover debt (% of debtor’s estate)

  • Measured as percentage of estate value

  • Court fees

  • Fees of insolvency administrators

  • Lawyers’ fees

  • Assessors’ and auctioneers’ fees

  • Other related fees

    To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used:

    • A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties.

    • The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater.

    • The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but makes enough money to operate otherwise.

    In addition, Doing Business evaluates the quality of legal framework applicable to judicial liquidation and reorganization proceedings and the extent to which best insolvency practices have been implemented in each economy covered.

    Outcome

  • Whether business continues operating as a going concern or business assets are sold piecemeal

    Recovery rate for creditors

  • Measures the cents on the dollar recovered by secured creditors

  • Outcome for the business (survival or not) determines the maximum value that can be recovered

  • Official costs of the insolvency proceedings are deducted

  • Depreciation of furniture is taken into account

  • Present value of debt recovered

    Strength of insolvency framework index (0- 16)

  • Sum of the scores of four component indices:

  • Commencement of proceedings index (0-3)

  • Management of debtor’s assets index (0-6)

  • Reorganization proceedings index (0-3)

  • Creditor participation index (0-4)

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Indicator

Kenya

Sub-Saharan Africa

OECD high income

Best Regulatory Performance

Recovery rate (cents on the dollar)

31.8

20.5

70.2

92.9 (Norway)

Resolving Insolvency – Kenya

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Cost (% of estate)

22.0

22.8

9.3

1.0 (Norway)

Time (years) 4.5 2.9 1.7 0.4 (Ireland)

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Figure – Resolving Insolvency in Kenya – Score

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Strength of insolvency framework index (0-16)

14.5

6.5

11.9

None in 2018/19

Outcome (0 as piecemeal sale and 1 as going concern) 1 .. .. ..

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34.2

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90.6

Recovery rate Strength of insolvency framework index

Figure – Resolving Insolvency in Kenya and comparator economies – Ranking and Score

DB 2020 Resolving Insolvency Score

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73.8: Mauritius (Rank: 28)

62.4: Kenya (Rank: 50)

57.2: Rwanda (Rank: 62)

48.2: Botswana (Rank: 84)

36.9: Namibia (Rank: 127)

31.3: Regional Average (Sub-Saharan Africa)

0 100

Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index.

Figure – Resolving Insolvency in Kenya – Time and Cost

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Time (years) Cost (% of estate)

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4.5

29.0

22.0

22.8

2.9

18.0

2.5

2.5

14.5 14.5

1.7

1.7

1.7

9.3

5

Time (years)

4

3

2

1

0

Botswana Kenya Mauritius Namibia OECD

high income

35

Cost (% of estate)

30

25

20

15

10

5

0

Rwanda Sub-Saharan Africa

Figure – Resolving Insolvency in Kenya and comparator economies – Measure of Quality

Kenya

Botswana

Mauritius

Namibia

Rwanda

OECD high income

Sub-Saharan Africa

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5.5

3

3

3

1

3

0

5.5

3

3

0.5

2

3

1 0

5

3

4

3

5.3

2.8

2.1

1.9

4.1

2.3

1

0.5

0 2 4 6 8 10 12 14 16

Sub-Indicator Score

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Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3)

Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.”

Figure – Resolving Insolvency in Kenya and comparator economies – Recovery Rate

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66.3

67.4

31.8

33.8

19.3

20.5

Recovery rate(cents on the dollar)

80

70

60

50

40

30

20

10

0

Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa

Details – Resolving Insolvency in Kenya

details resolving insolvency in kenya

Details – Resolving Insolvency in Kenya – Measure of Quality

details resolving insolvency in kenya measure of quality details resolving insolvency in kenya measure of quality

Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.”

Employing Workers

Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business.

The most recent round of data collection was completed in May 2019.See the methodology for more information.

What the indicators measure

Case study assumptions

Hiring

(i) whether fixed-term contracts are prohibited for permanent tasks; (ii) maximum cumulative duration of fixed-term contracts;

(iii) length of the maximum probationary period; (iv) minimum wage;(v) ratio of minimum wage to the average value added per worker.

Working hours

(i) maximum number of working days allowed per week; (ii) premiums for work: at night, on a weekly rest day and overtime;

(iii) whether there are restrictions on work at night, work on a weekly rest day and for overtime work; (iv) length of paid annual leave.

Redundancy rules

(i) whether redundancy can be basis for terminating workers; (ii) whether employer needs to notify and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment.

To make the data comparable across economies, several assumptions about the worker and the business are used.

The worker:

  • Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.

  • Is a full-time employee.

  • Is not a member of the labor union, unless membership is mandatory.

    The business:

  • Is a limited liability company (or the equivalent in the economy).

  • Operates a supermarket or grocery store in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Has 60 employees.

  • Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them.

  • Abides by every law and regulation but does not grant workers more benefits than those mandated by law, regulation or (if applicable) collective bargaining agreements.

Redundancy cost

(i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected.

Employing Workers – Kenya

Details – Employing Workers in Kenya

Hiring

Fixed-term contracts prohibited for permanent tasks? No

Maximum length of a single fixed-term contract (months) No limit

Maximum length of fixed-term contracts, including renewals (months) No limit

Minimum wage applicable to the worker assumed in the case study (US$/month) 288.1

Maximum length of probationary period (months) 12.0

Ratio of minimum wage to value added per worker 1.2

Standard workday 8.6

Working hours

Maximum number of working days per week 6.0

Premium for night work (% of hourly pay) 0.0

Premium for work on weekly rest day (% of hourly pay) 0.0

Premium for overtime work (% of hourly pay) 50.0

Restrictions on night work? No

Restrictions on weekly holiday? No

Restrictions on overtime work? No

Paid annual leave for a worker with 1 year of tenure (working days) 21.0

Paid annual leave for a worker with 5 years of tenure (working days) 21.0

Paid annual leave for a worker with 10 years of tenure (working days) 21.0

Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 21.0

Redundancy rules

Dismissal due to redundancy allowed by law? Yes

Third-party notification if one worker is dismissed? Yes

Third-party approval if one worker is dismissed? No

Third-party notification if nine workers are dismissed? Yes

Third-party approval if nine workers are dismissed? No

Retraining or reassignment obligation before redundancy? No

Priority rules for redundancies? Yes

Priority rules for reemployment? No

Redundancy cost

Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3

Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 4.3

Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 4.3

Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 2.1

Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 4.3

Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 10.7

Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 21.4

Unemployment protection after one year of employment? No

Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 11.4

PEO Kenya

Kenya stands as a promising destination for Professional Employer Organization (PEO) services, boasting a dynamic business environment amidst its diverse and vibrant culture. With a strategic location in East Africa, Kenya serves as a gateway to a rapidly growing regional market. The country’s pro-business policies, coupled with a burgeoning entrepreneurial spirit, have attracted both local and foreign enterprises seeking PEO solutions. As Kenya continues to develop its infrastructure and enhance its workforce, PEO services play a pivotal role in assisting businesses to navigate complex employment regulations, manage human resources efficiently, and tap into the nation’s pool of skilled professionals. Embracing innovation and globalization, Kenya emerges as an attractive PEO hub in the African landscape, providing streamlined solutions for companies looking to expand and thrive in this thriving economic landscape.

Professional Employer Organization (PEO) services have gained significant traction in Kenya’s business landscape, offering a strategic avenue for companies to streamline their human resources and focus on core operations. With Kenya’s evolving labor laws and regulations, PEO services provide a valuable solution for both local startups and international corporations looking to establish a presence. These services encompass a range of offerings, including payroll management, employee benefits administration, compliance with employment laws, and talent acquisition. By partnering with a PEO in Kenya, businesses can navigate the intricacies of employment procedures while mitigating risks and ensuring legal compliance. This enables companies to enhance their operational efficiency, access top-tier talent, and concentrate on their growth strategies, all within the framework of Kenya’s dynamic and evolving business ecosystem.

Business Reforms in Kenya

From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by

Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008.

=Doing Business reform making it easier to do business. = Change making it more difficult to do business.

DB2020

Dealing with Construction Permits: Kenya made dealing with construction permits more transparent by making building permit requirements publicly available online and by reducing fees.

Getting Electricity: Kenya improved the reliability of electricity supply by modernizing its existing infrastructure and by inaugurating a new substation in Nairobi.

Registering Property: Kenya made property registration faster by moving consents to transfer, payment and payment verification online. At the same time, property registration was made more difficult due to an additional payment slip generation and increased consent application and title search fees.

Getting Credit: Kenya strengthened access to credit by introducing online registration, modification and cancellation of security interests, and public online searches of its collateral registry.

Protecting Minority Investors: Kenya strengthened minority investor protections by requiring shareholders to approve the election and dismissal of an external auditor.

Paying Taxes: Kenya made paying taxes easier by introducing an online filing and payment system for social security contributions.

Resolving Insolvency: Kenya made resolving insolvency easier by improving the continuation of the debtor’s business during insolvency proceedings.

DB2019

Registering Property: Kenya made registering property easier by introducing an online system to clear land rent rates. Meanwhile, Kenya made the property registration process less transparent by no longer making information on land ownership publicly available.

Getting Credit: Kenya strengthened access to credit by introducing a new Secured Transactions Law creating a unified secured transactions legal framework, and establishing a new unified and notice-based collateral registry.

Protecting Minority Investors: Kenya strengthened minority investor protections by increasing disclosure requirements, regulating the approval of transactions with interested parties and increasing available remedies if said transactions are prejudicial, increasing shareholders’ rights and role in major corporate decisions and requiring greater corporate transparency.

Paying Taxes: Kenya made paying taxes easier by merging all permits into a single unified business permit and by simplifying the value added tax schedule on its iTax platform.

Resolving Insolvency: Kenya made resolving insolvency easier by facilitating the continuation of the debtor’s business during insolvency proceedings, providing for equal treatment of creditors in reorganization proceedings and granting creditors greater participation in the insolvency proceedings.

DB2018

Starting a Business: Kenya made starting a business easier by merging procedures required to start-up and formally operate a business.

Dealing with Construction Permits: Kenya made dealing with construction permits less expensive by eliminating fees for clearances from the National Environment Management Authority (NEMA) and the National Construction Authority.

Getting Electricity: Kenya improved the reliability of electricity by investing in its distribution lines and transformers and by setting up a specialized squad to restore power when outages occur.

Getting Credit: Kenya improved access to credit information by starting to distribute data from two utility companies.

Paying Taxes: Kenya made paying taxes easier by implementing an online platform, iTax, for filing and paying corporate income tax and the standards levy.

Trading across Borders: Kenya reduced the time for import documentary compliance by utilizing its single window system, which allows for electronic submission of customs entries.

DB2017

Starting a Business: Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation.

Getting Electricity: Kenya streamlined the process of getting electricity by introducing the use of a geographic information system which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection.

Registering Property: Kenya made Registering property easier by increasing the transparency at its land registry and cadastre.

Protecting Minority Investors: Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company.

Resolving Insolvency: Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners.

DB2016

Starting a Business: Kenya made starting a business easier by reducing the time it takes to assess and pay stamp duty.

Dealing with Construction Permits: Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the building permit and by increasing the costs for both water and sewerage connections

Getting Electricity: The utility in Kenya reduced delays for new connections by enforcing service delivery timelines and hiring contractors for meter installation.

Registering Property: Kenya made property transfers faster by improving electronic document management at the land registry and introducing a unified form for registration.

Getting Credit: Kenya improved access to credit information by passing legislation that allows the sharing of positive information and by expanding borrower coverage.

DB2015

Dealing with Construction Permits: Kenya made dealing with construction permits more costly by increasing the building permit fees.

Getting Credit: Kenya improved its credit information system by passing legislation that allows the sharing of both positive and negative credit information and establishes guidelines for the treatment of historical data.

Paying Taxes: Kenya made paying taxes more costly for companies by increasing employers’ social security contribution rate.

DB2013

Paying Taxes: Kenya made paying taxes faster for companies by enhancing electronic filing systems.

DB2012

Enforcing Contracts: Kenya introduced a case management system that will help increase the efficiency and cost-effectiveness of commercial dispute resolution.

DB2011

Starting a Business: Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, merging the tax and value added tax registration procedures and digitizing records at the registrar.

Paying Taxes: Kenya increased the administrative burden of paying taxes by requiring quarterly filing of payroll taxes.

Trading across Borders: Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue Authority’s electronic data interchange system for customs clearance.

DB2010

Dealing with Construction Permits: Kenya made dealing with construction permits more costly by raising fees.

Getting Credit: Kenya improved access to credit information through a new law on credit bureaus providing a framework for a regulated and reliable system of credit information sharing.

DB2009

Starting a Business: Kenya reduced the time required to start a business through improvements at the registry and better communication between relevant agencies.

Trading across Borders: Kenya made trading across borders easier by extending the operating hours of customs and port authorities, reducing the number of inspection points between Nairobi and Mombasa and introducing an electronic system allowing traders to submit their documents online.

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DB2008

Starting a Business: Kenya reduced the time and cost to register a company through an ambitious licensing reform program that eliminated 110 types of business permits and simplified 8 others.

Dealing with Construction Permits: Kenya made dealing with construction permits easier by simplifying procedures, improving efficiency in issuing permits and reducing the cost of obtaining a telephone connection.

Registering Property: Kenya speeded up property registration by allowing private practitioners (in addition to government valuers) to carry out land valuations, which reduced the time required for a valuation from a month to a week.

Getting Credit: Kenya’s private credit bureau expanded the coverage of its database by adding retailers and utility companies as providers of credit information.

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