Follow along as The Kenyan Wallstreet tracks the Central Bank of Kenya’s press conference with Governor Patrick Njoroge on how the demonetization of the Ksh 1000 notes happened.
The exercise began on 1st June 2019 and ended on 30th September 2019.
Patrick Njoroge’s statement on demonetization is about the removal of state of legal tender on a note.
Furthermore, Njoroge believes that demonetization will tame the illicit flow of funds and deal with counterfeit and fake 1000 notes.
Njoroge says that India demonstrated that immediate withdrawal -India demonetized in 2 months – affects trade negatively leading to the economic slowdown. This, therefore, informed Kenya’s gradual approach to demonetization as CBK took four months.
In this case, CBK had to strike a balance to allow the public enough time to change the notes but also prevent cases of illicit funds entering the financial system. One of the anti-money laundering measures was for people to show that their money was legit.
Moreover, CBK worked closely with forex bureaus, microfinance institutions, and commercial banks to ensure no illegal financial transactions. The institutions provided weekly reports which ensured that CBK had a grip on what is happening.
Close monitoring of transactions and financial activities proved fruitful as the 3172 suspicious transactions were flagged across Forex Bureaus, Microfinance, and commercial banks.
DCI, KRA, EACC, and FRC got the information they can act on and the process is ongoing as CBK conducted 15 targeted inspections.
In August alone, the volume stood at 161 million transactions including payments to restaurants, EFT, RTGS transfers, and Mobile money transactions.
On top of that, CBK applied a multilayered strategic approach to demonetization where it sought feedback from the public then gave a tactical response to the feedback.
In terms of value, only 62% of the transactions were less than Ksh500,000, 72% less than Ksh1 million. However, in terms of numbers, 96% were less than Ksh 500,000.
Foreign exchange and inflation remained unaffected by the demonetization as CBK had placed stringent anti-money laundering measures in place.
CBK’s Plan
In addition, Dr. Njoroge says that CBK will ensure that everyone is aware of the demonetization. furthermore, CBK will ensure that the new notes are widely available across the country.
CBK also plans to push awareness of security features on notes by using various platforms to communicate about demonetization. Currently, CBK has used 82 radio stations, posters, roadshows, and 15,000 adverts across the country.
CBK will punch the 209,661,000 million pieces of the 1000 notes collected during the demonetization process and shred them to form a powder that is made into a bricket. one bricket contains one million shillings.
However, Dr. Njoroge notes that there were over 7 million 1000 notes that remained in circulation amounting to Sh7.4Bn, which was rendered worthless on October 1.
[bctt tweet=”CBK is happy with the outcome of the whole demonetization process as it went as planned and prepared. It helped Kenya move towards being a cashless society.”]
