• A review of the different demonetisation experiences across the world including in India and the US had shown Kenya’s gradual model of phasing out the old notes was ideal for the economy as opposed to a sudden phase-out
• UNDPhas backed the decision to phase out the older Sh1,000 note as an important and necessary step to curb illicit cash.
The new notes and the demonetisation of Sh1,000 banknotes will reinvigorate the strength of the Kenyan currency.
Demonetisation has been used as a tool to stabilise currency and fight inflation, to facilitate trade and access to markets, and to push informal economic activity into more transparency and away from black and grey markets.
Similarly, Central Bank governor Patrick Njoroge confirmed they acted on the considered opinion of the impact the immediate ban would have on the majority of Kenyans, especially those living in remote areas.
The 120-day grace period till October 1, when the Sh1,000 note will be rendered an illegal tender ensures no financial shortfalls are occasioned in the cash flow that would trigger inflation since the withdrawal is not immediate unlike in India in 2016, where the withdrawal of 500 and 1000-rupee banknotes from its financial system was an overnight surprise. Those in possession of less than Sh5 million in the old notes are exchanging at their banks and those with more than Sh5 million to do so at the CBK.
You will agree with me that as every country aspires to have a strong and stable currency, move to ban Sh1,000 note is timely and would help get rid of illicit financial flows and counterfeits that have hit the Kenyan market
Given that money serves as a medium of exchange, as a store of value and as a unit of account, indisputably, fewer counterfeits will restore faith in our currency. It is instructive, however, to note that older versions of smaller denominations of Sh500, Sh200, Sh100 and Sh50 will remain in circulation alongside the new ones.
Kenyan banks have committed to reconfigure their ATMs and currency counters to allow them to dispense the new notes. There are approximately 1,700 ATMs, 780 branches and 66,000 bank agents countrywide.
Similarly, the United Nations Development Programme has backed the decision to phase out the older Sh1,000 note as an important and necessary step to curb illicit cash. No doubt the landmark move will help foster a clean and digitised economy.
A review of the different demonetisation experiences across the world including in India and the US had shown Kenya’s gradual model of phasing out the old notes was ideal for the economy as opposed to a sudden phase-out.
As the Kenya National Chamber of Industry and Commerce, we are committed to boosting trade ties to bolster access to the international market for the Kenyan business community.
For instance, we are at the tail end of formulating a working arrangement with the Dubai Chamber on various fronts.
To start with, we are working on the establishment of the ATA Carnet system in Kenya which shall expose members to international export standard and international markets through the chamber network, give temporary duty free admission of goods in any given country as the ATA Carnet does, Issuance of ATA Carnet for ease of access for small traders to attend expos and have their goods tax exempt.
Commendably, they have agreed to capacity build the secretariat on running a professional chamber and SME on sustainability for their businesses.
Similarly, the Micro, Small and Medium Enterprises sector in Kenya has over the years been recognised for its role in the provision of goods and services and a major employer in the informal sector.
As a key pillar in the economy, their interests must be jealously guarded to enable them to compete internationally through various domestic and international linkages.
For instance in the famous Gikomba Market in Nairobi, Chinese are allowed to trade but wholesalers must be given bonded warehouses at the port of entry and allow only local distributors to buy from them at reasonable prices which will have a trickle-down effect to distributors and retailers to cushion the end users from exorbitant prices. This way, we protect all businesses.
Richard Ngatia is the president of the Kenya National Chamber of Commerce and Industry (KNCCI)