The clock finally ticked on 30th September 2019, for the old Ksh 1000 notes. Central Bank of Kenya on July Ist informed Kenyans that the old Ksh 1000 notes will no longer be in circulation and its value reduced to mere paper in four months’ time, a directive that has successfully come to fruition thank to utmost cooperation of Kenyans who are notorious for the last-minute rush.
According to the CBK Governor Patrick Njoroge said the Ksh 1,000, which is the largest currency bill, was being used for illicit financial flows and forgery in Kenya and other neighboring states, and currency notes in circulation will help fight the money laundering that has promoted corruption.
This is how CBK successfully achieved its demonetization of the Ksh 1000 notes, without extending the deadline it had set for the whole process.
Creating public awareness
It was vital for CBK to implement a very strong communications strategy. CBK’s first priority was to ensure that everyone was aware of the new banknotes and their security features, as well as ensuring wide availability.
“We moved from Kondele in Kisumu, to Lunga Lunga in Kwale, Garissa and Wajir, Narok and many other places. There were also more than 15,000 adverts on radio, 27 interviews directly with the Governor, television appearances, posters in schools and administrative centers, and more,” noted CBK governor.
All Banks, forex bureaus, microfinance institutions, money transfer and mobile money agents issued with the Anti-Money laundering (AML) and Countering the Financing of Terrorism (CFT) guidelines, to safeguard the integrity of the financial system during the process.
Data from the Central Bank of Kenya revealed that there are 217.6 million pieces of the old KES 1,000. As of September 30, CBK had circulated 149,692,000 pieces of the new KSh 1,000 notes.
CBK informed the public that those with a value of less than KES 1 million to exchange the old notes in their bank branches. Those with amounts between KES 1m and KES 5m were to exchange them in their own banks while those with amounts above KES 5 million had to contact the Central Bank.
Out of the 217,047,000 pieces of KSh 1,000 as of June 1, the amount received was 209,661,000 pieces of KSh 1,000. The 7,386,000,000 that was not collected is officially worthless pieces of paper.
96% of transactions under Ksh 500,000, while 99% of transactions were under KSh 1,000,000. In terms of value up to KSh. 500,000 were 62%, up to KSh 1,000,000 were 79% and to KSh 2,000,000 were 92%, a proof that the demonetization process achieved its purpose.
3,172 suspicious transactions were flagged during the demonetization period.
Disposal of the old Ksh 1000 notes
Insiders say that a date is set within a week when the collected notes will be cut into finer shreds and packed in sacks before being transported to Kariobangi North, near the market, where they will be burnt in the open under the watch of armed police officers. With the old Ksh 1000, they will not be destroyed by fire.
“If you put all the 217 million pieces of the KSh 1,000 notes, they would fit in only five 40-ft containers. When we receive banknotes, we punch them and shred them, then compact them into a briquette,” said CBK Governor Patrick Njoroge.
Impact of demonetization on Kenya’s economy.
According to CBK, there were no was no impact on inflation, there was no queue of buyers of high-value assets to launder money. With the AML/ CFT measures were applied to the forex market, there was no impact on the exchange rate. Just a few queues at banks.
“Demonetisation was to deal with illicit financial flows and to deal with counterfeits, and the currency of choice was the old KSh 1,000 note. The reasons for this went to the furthest corners of the country. We implemented a robust anti-money laundering framework as we conducted the demonetization exercise,” he added.
Governor Njoroge mentioned that in designing the demonetization strategy, they had to look at the experience of other countries and learned from them so as to minimize the disruption to the economy while enhancing effectiveness.