The demonetization of Kenya’s Ksh 1,000 notes ends in a month. So far, conversion stands at approximately 100 million out of the 217 million one-thousand notes. This amount to Ksh 100 billion worth of the 1000 note denomination. At the same time, the process has brought to light cases of money laundering, which Central bank hopes to close on.
Patrick Njoroge, the Central Bank Governor believes that the process is giving Kenya a fresh start as the country rids itself of the old Ksh 1,000 notes.
Speaking on an interview with Citizen, the governor said that CBK will not convert all the 217 million notes. This is because people with proceeds from crime will shy away from the process to avoid scrutiny. While the process targets all Kenyans, its current progress be a good sign. By the end of September, a shortfall in conversion will mean that “dirty money” did not transition back to the economy.
However, the governor believes that it is too early to draw conclusions. Mr. Njoroge pointed out that Kenyans can only appreciate the totality of the demonetization process come September 30. This is because some Kenyans prefer to wait until the last minute.
What will demonetization’s success look like?
Demonetization will achieve parts of its success if the process does not convert all the liquid currency in the economy. “This will help diminish the wealth of individuals who stole hard cash” noted Mr. Njoroge.
While the war against corruption was part of demonetization’s motivation, the governor warns that criminals might have converted some money to other assets.
Finally, the Central bank plans to prevent a repeat of the process in a few years. He believes that after September 30, the economy will have less flow of illicit funds.
This, and a sustainable war against corruption will help prevent the need to demonetize again in the near future. Besides, the growth of digital cash platforms such as M-Pesa will promote a society with less cash. Such a society will experience less theft in cash, therefore reducing the need to demonetize.
