Kenya’s proposed new taxes risk hampering the growth of fintechs and mobile money services, with Safaricom’s M-Pesa likely to be the worst hit, experts told Semafor.

Kenya President William Ruto’s administration is seeking to impose a new 16% value-added tax on services by payment service providers including M-Pesa and Airtel Money under a new finance bill. It also proposes a 25% excise duty on mobile phones, and withholding tax on card payments.

The National Treasury’s plan could impact both the market share and usage of M-Pesa — Kenya’s biggest fintech platform, economists and policy analysts told Semafor. They pointed out that the platform, used by around 90% of Kenyans, already faces widespread criticism over its high transaction fees. The Central Bank of Kenya (CBK) last year began a push to cap mobile money costs to drive financial inclusion, a goal that the new taxes would threaten.

Analysts said the move to impose VAT would drive a significant number of consumers back to cash transactions to avoid costly charges, and risked hurting the country’s position as a leader on the continent in mobile money and fintech in addition to impacting diaspora remittances.

Ken Gichinga, chief executive of Nairobi-based Mentoria Economics, told Semafor that the high costs of mobile money transactions resulting from the introduction of the proposed VAT would likely disincentivize the use of M-Pesa and other mobile money services.

High transaction fees are a significant obstacle to the use of digital services despite over 80% of Kenyans having a mobile money account: Millions prefer cash as mobile money costs can rise up to 7% of the transfer value, according to the CBK.

Safaricom did not immediately respond to a request for comment from Semafor.