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All about the ‘elephants’: Sh1,000 note is king of transactions in Kenya

Kenya shilling notes
GRAPHIC | GENNEVIEVE AWINO 
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Crisp banknotes of various denominations may be lining the pockets of many in Kenya, but it is the Sh1,000 note that stands out from the crowd.

Despite its high value, the Sh1,000 banknote remains the most widely held in Kenya — defying popular belief that smaller value notes are the most sought-after in the country.

In fact, analysis of currency circulation in the country shows that the Central Bank of Kenya (CBK) has had to inject into circulation an additional 120.15 million pieces of Sh1,000 note worth Sh120.15 billion in eight years to June 2018 to meet rising demand.

The data, drawn from CBK banking supervision reports, shows that the Sh1,000 note, popular for its elephant symbol, is increasingly being preferred in transactions as other denominations such as Sh500 and Sh200 note drag.

Whereas the pieces of Sh1,000 notes in circulation were valued at Sh210.37 billion by end of June last year, those of Sh500 were only Sh16.31 billion. This is a value gap of Sh194.06 billion.

Comparing the value of same denominations shows that while in 2010 the value of Sh1,000 notes in circulation was 7.12 times that of Sh500 notes, the gap has widened to 12.89 times in 2018.

The increased popularity of Sh1,000 notes beats the popular view that lower denomination notes such as Sh50 and Sh100 are on high demand in meeting daily transactions.

During the year under review, circulation of Sh500 notes dropped by 2.54 percent to 32.62 million pieces. This is from a high of 37.83 million pieces in the year to June 2014.

Despite bank notes quantities in circulation decreasing by 3.6 percent from 531 million pieces in the year to June 30, 2017 to 512 million pieces, in the year to June 30, 2018, quantities of Sh1,000 note booked a 4.59 percent rise.

However, coins in circulation increased by 4.8 percent over the same period with notable increases in usage of the Sh10 and Sh20 coins. This helped lift overall currency circulation.

“Currency in circulation increased by 3.4 percent during financial year 2017/18 on the basis of national demand--- bank notes accounted for 97 percent and coins three percent of currency in circulation,” CBK said.

All coins saw a surge in demand. The CBK increased pieces of Sh20 and Sh10 coins by 10.28 percent and 10.83 percent respectively. The Sh1 coin continues to defy inflation, with 801.94 million pieces being in circulation as at end of June last year, up from 539 million in mid-2010.

The CBK issues new currency through its offices in Nairobi, Mombasa, Kisumu, Eldoret, Nyeri, Nakuru and Meru.

Demand for Sh200 notes also went up, making the CBK increase circulation by 12.07 percent to 54.86 million pieces.

The number of Sh50 note pieces in circulation dipped 25.72 percent to 75.63 million pieces, the lowest since June 2013. In May last year, CBK released new Sh50 notes into the market and recalled worn out ones after public outcry.

The value of bank note deposits by lenders declined by 2.2 percent to Sh501.8 billion by June 2018. This signifies that more money was circulating outside the banking system.

But at the same time, bank note withdrawals also decreased from Sh531.4 billion to Sh509.8 billion in the same period.

Currency comes with risk of counterfeiting. However, the CBK says it continues to create and enhance public awareness on security features of banknotes as a way of minimising this vice.

“The awareness and other anti-counterfeiting strategies are carried out in collaboration with commercial banks, security agencies, other educational institutions and currency dispensing machine vendors,” it says.

Some economies in the world such as India and Singapore have had to withdraw their most valuable notes to close down the economy of untaxed cash transactions, which they said allowed corruption, funding of terrorist groups, and encouraged currency counterfeiting.

India withdrew its highest value bank notes- 500 and 1,000 rupee notes- as part of clampdown on ‘black money’. In 2014, Singapore stopped printing the mammoth S$10,000 banknote (equivalent to about Sh750,000), one of the world’s largest value banknotes.

For Kenya, Sh1,000 note is the largest value bank note followed by Sh500. Incidents of corruption linked to the most valuable currency have been reported before in the country.

The Sh500 note was once on the spot in Kenya’s 1992 election. The note was popular with Cyrus Jirongo, then chairman of the Youth for Kanu ‘92 lobby group. It came to be pejoratively referred to as ‘Jirongo.’

The crispy note was newly-minted to beat the then largest denomination in the country-Sh200 note but was allegedly circulated by Kanu politicians to sway votes their way.

The CBK is the only institution in Kenya with full discretion and sole rights to issue currency notes and coins. It is also charged with planning, forecasting, procuring and distributing it, according to information on CBK website.

“The Central Bank maintains specialised machines that are used to process banknotes and coins, and those that are fit for circulation are set aside for re-distribution,” says CBK on its website.

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