Kenya has deliberately embedded tax incentives to its climate-finance strategy. One of the clearest examples is the preferential tax treatment on interest earned from qualifying green and infrastructure bonds.
These instruments, when aligned with Kenya’s Green Bond Guidelines and issued for eligible environmental or social projects- allows investors to earn returns without the usual income or withholding taxes.
Green bonds marketed as “tax-exempt” allow investors to keep the full yield. For retail investors, the coupon paid is not reduced by the standard 15% withholding tax. For pension funds, insurance firms and asset managers, the exemption improves net returns, making long-tenor climate projects more bankable.
Safaricom’s multi-billion-shilling offer, framed as a tax-free fixed-income instrument, is structured to take advantage of precisely these provisions- and appeal to a wider investor base as a result.
The tax advantage is rooted in Kenyan legislation and policy. Over the past decade, Kenya has introduced targeted exemptions for interest income from bonds and similar securities used to finance infrastructure or projects eligible under green-finance classifications. These exemptions require that the bond be listed, meet minimum maturity thresholds, and- critically- channel proceeds into approved green or social assets such as renewable energy installations, energy-efficient upgrades, waste management, clean transport, or climate-resilience investments.
The incentives matter because they lower the cost of capital for climate-aligned projects.
The National Treasury’s Green Fiscal Incentives Frameworks and the guidelines developed under the Green Bonds Programme of Kenya reinforce this architecture.
However, the tax benefits are not blanket or automatic. Eligibility depends on strict compliance with Kenya’s Green Bond Standards, proper ring-fencing of proceeds, and transparent reporting. At the same time, Parliament has intermittently proposed expanding taxation on some previously exempt instruments.
Recent Finance Bill debates have included attempts to introduce withholding tax on newer infrastructure or green-themed issuances, though not all proposals have been enacted. This means investors must always review the final offering memorandum closely and confirm that the tax-exempt status applies to their specific category- resident, non-resident, institutional or retail.
For policymakers, the lesson is clear, predictable incentives attract private climate capital, while uncertainty or frequent changes risk slowing the momentum.
The incentives matter because they lower the cost of capital for climate-aligned projects. Tax exemptions increase the attractiveness of green financing relative to conventional bonds, allowing issuers to reduce the coupon they pay while still offering compelling net returns to investors.
In Kenya’s context, where domestic savings are growing and large corporations seek funding for sustainability transitions, this structure becomes a powerful tool. Safaricom’s current issuance, intended to support solarization of network sites and other energy-saving initiatives, demonstrates how a large issuer can mobilize local capital by leveraging tax-policy advantages.
For investors, the practical step is simple: read the prospectus and confirm the statutory basis of the exemption. For policymakers, the lesson is clear, predictable incentives attract private climate capital, while uncertainty or frequent changes risk slowing the momentum.
