Bars, restaurants, and churches are among those targeted as people rush to beat the October 1 deadline for the 1000 shilling note demonetization set by the Central Bank of Kenya (CBK).
The demonetization process has been slow even as the CBK announced that it would not change the deadline by extending it to a later date.
Since the deadline is nearing, people are now using fast-money-generating businesses and churches as avenues to get rid of their excess old notes.
Millionaires have realized that bars, restaurants and churches are the best to take their excess cash as they get millions within a short period of time. Some get millions within a week.
These avenues are now seen as vulnerable to helping people to get rid of their illegally acquired money.
You shouldn’t be shocked when you visit a bar or a night club and find people throwing cash around especially the old 1000 shillings note.
The rush to beat the deadline has also increased liquidity in the market as some experts suggest. People with excess old notes will now start paying premiums in order to acquire and exchange their shillings with dollars.
East African states especially, Tanzania and Uganda, had stopped the use of Kenyan currency to reduce the rate at which the money is used in the aforementioned countries.
Since the announcement of the demonetization process, there has been a buyer-seller problem as experts say there has been excess money chasing fewer goods.
“There is too much money chasing few goods. In the last three months, CBK has created a buyer-seller problem,” Ken Gichiga-a chief economist at Mentoria argues.
Kenya has been losing 40 billion shillings due to illegal financial flows annually according to industry data.
Recently, 25 billion shillings resurfaced into circulation after the announcement of the phasing out of the old notes was made by CBK boss Patrick Njoroge.
CBK expected to demonetize 1.2 trillion shillings but only 540 billion shillings has been in circulation, leaving out more than 700 billion shillings of old currency in people’s hands and safes.
The 1000 shillings notes represent 83 per cent of the 540 billion shillings, 500 shillings notes account for 5.9 percent, 200 notes (4.2 percent), 100 shillings notes (4.8 percent), while 50 shillings notes account for 1.9 percent.
CBK has been withholding part of the old 1000 shillings note while focusing on releasing the new notes in order to increase the rate of demonetization.
It is still not clear whether CBK will extend the demonetization deadline but what everyone is sure of is that the old 1000 shilling note will still be in excess by October 1.