An image of the phased out Sh1,000 bank notes. PHOTO | FILE | NATION MEDIA GROUP
When the Central Bank of Kenya and the 42 commercial banks in
the country shut doors to their branches Monday, all the old Sh1,000
notes will cease to be legal tender.
CBK Governor
Patrick Njoroge says as soon as his computers are switched off at the
close of business this evening, all the bank notes not yet converted
will become worthless pieces of paper.
Many banks close by 4pm, which means that this will be the actual deadline and not midnight Monday.
The
CBK says it will destroy all the old notes collected as the final stage
in the four-month demonetisation process that officially ends Monday.
Analysts
say the success of the process will be measured after the country gets
the real picture of the total money in circulation, even as it becomes
clear that it will be impossible to collect all the Sh217 billion that
the exercise was targeting.
POSSIBLE OUTCOME
The CBK caught the country off-guard on June 1 when it announced
the demonetisation after secretly printing the new generation bank
notes and quietly gazetting the laws to give the notes a legal backbone.
The Central Bank chose a public holiday to launch its
attack, seeking to rid the country of dirty money, tax evaders,
terrorist financiers, money launderers and deal with counterfeiters.
But
with the deadline here with us, it is emerging that the only thing the
CBK is sure to have achieved is replacing the old Sh1,000 notes with the
new ones in line with the Constitution.
It is also
probable that CBK will end up with a hole on its books estimated to run
into billions of shillings if nothing out of the ordinary happens
Monday.
This is because Kenyans have been in no hurry to return the money despite the massive awareness campaigns.
WAR ON FAKES
Most companies and retailers have not been accepting the old notes towards the end of the grace period.
On
Monday, those who do not want to lose their money will have to walk
into a bank or a CBK outlet to convert or risk losing it.
In
recalling the 217 million pieces of the old notes in a massive and
expensive process that cost the taxpayer over Sh15 billion, the CBK had
taken the war back to the doors of counterfeiters.
At
the end of it, the bank hoped to suck back Sh217 billion, which
represents 80 per cent of all the money in circulation, in a process
that would redistribute it back in the economy.
So far there have been no arrests or prosecution of those caught with unexplainable wealth.
Either
they had anticipated the June 1 action long before it came and
converted the billions in US dollars before CBK came calling, or they
opted to lose their loot.
BLACK MONEY
By
September 1, only 24 people had walked into any of the commercial banks
in the country with more than Sh2 million to convert.
In fact, 99 per cent of those who converted the notes had Sh1 million or less.
This
means that either no one had more than the Sh1 million or those who did
decided to beat the system by breaking their loot into smaller amounts
to escape the scrutiny of the CBK.
There was no rush
and hardly did any bank witness scenes seen elsewhere in the world where
panicked citizens arrived in banking halls with sack loads of money.
Mr
Tony Watima, an economist, says that there is not much evidence of
curbing black money through demonetisation, even if circulation of money
is stopped as it has been done in Libya, Zimbabwe and India.
“This
is because not all corruption income is necessarily cash income. In
fact, majority of ill-gotten cash never remains idle, they are always
locked in physical assets such as real estate, or high-value purchases,
personal foreign travel and investment in unaccounted businesses,” Mr
Watima said.
AMOUNT COLLECTED
The CBK has not been keen on giving statistics on the total value of money so far returned.
However by August, about Sh100 billion had been exchanged, which was nearly half of the Sh217 billion that was to be replaced.
In
value terms, the CBK said 58 per cent of all the money exchanged by
September 1 was less than Sh500,000 while 75 per cent was less than Sh1
million.
The Kenya Bankers Association chief executive
officer, Mr Habil Olaka, says the CBK does not have to print and issue
new notes in the market to deal with the deficit, but it will have a
better understanding of just how much money is out there in the market
to inform its future decisions.
The KBA is the industry lobby that speaks for banks.
On
its part, Kenya Forex Bureaus Association Chief Executive Officer
Mohammed Nur Ali said it has been business as usual for members and the
earlier anticipated spike in currency action by money launderers did not
materialise.
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