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Money outside banks increases by Sh34 billion

Central Bank of Kenya
Central Bank of Kenya building in Nairobi. FILE PHOTO | NMG 

The value of currency circulating outside banks rose by Sh33.9 billion in two months to November, touching a five-month high after the end of Central Bank of Kenya (CBK) demonetisation process in September.

Fresh data from CBK shows currency outside banks rose from Sh157.7 billion in September to Sh191.6 billion in November.

The circulation was at Sh222 billion in May before dropping to Sh196.9 billion in June when the four-month exercise of mopping up the old Sh1,000 notes started.

A CBK Gazette notice on May 31, 2019 said the older Sh1,000 bank notes were withdrawn from circulation and would cease to be legal tender on October 1, 2019.

The fastest drop in cash outside lenders was seen in the September-October period when it dipped by 26.4 percent or Sh27.2 billion to close at Sh157.7 billion.

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Increased money outside banks means more people who had rushed to take money into the banking system on demonetisation directive are beginning to withdraw their money.

Most cash-rich persons and businesses that handle high liquidity prefer holding money in cash to meet their transactions needs.

CBK announced last year that it received 209,661,000 pieces of the old Sh1,000 notes at the end of September in contrast with 217,047,000 pieces that were in circulation on June 1. This means Sh7.386 billion worth of cash was rendered worthless at the end of demonetisation. “A significant proportion of this amount would represent cash that was held by individuals who were unable or unwilling to subject themselves to the robust checks in place,” CBK announced.

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