Hard cash in circulation declines to 8-month low
Data from the Central Bank of Kenya (CBK) shows the value of the total currency in notes and coins outside banks dropped by Sh5.1 billion to Sh240.4 billion in October from Sh245.5 billion in November.
Circulation of hard cash in the economy hit an eight-month low in October last year amid an economic slowdown, increased switch to mobile money and high-interest rates.
Data from the Central Bank of Kenya (CBK) shows the value of the total currency in notes and coins outside banks dropped by Sh5.1 billion to Sh240.4 billion in October from Sh245.5 billion in November.
It is the lowest value of currency in circulation since February when Sh238.5 billion was physically circulating within the economy.
Circulation of cash had hit a record high of Sh261.5 billion in July at the height of political campaigns ahead of the August 2022 polls as politicians splashed millions of shillings in cash to woo the electorate.
The growth of the economy however slowed down in the months leading to and after the polls affecting cash in circulation.
Kenya’s gross domestic product (GDP) grew by 4.7 per cent in the third quarter ended September from 9.3 per cent in a similar period the previous year, said the Kenya National Bureau of Statistics (KNBS).
“Most sectors posted decelerated growths owing to the significantly high growth rates recorded in the third quarter of 2021 that signified recovery from the impact of the Covid-19 pandemic,” said KNBS.
The amount of money in circulation is affected by many factors including the increased adoption of mobile transactions which has cut the reliance on cash transactions.
Mobile money transactions growth
For instance, mobile money transactions grew by 15.2 per cent in the 11 months to November last year compared to a similar period in the previous year.
Official statistics show the value of mobile money transactions hit Sh7.2 trillion for the 11-month period up from the Sh6.24 trillion that was transacted during the same period in 2021.
This as the volume of mobile money transactions grew by 4.9 per cent to 2.07 billion transactions during the review period up from 1.97 billion transactions in 2021.
Demand deposits – which includes money cash deposited in banks as float for electronic money transfers – increased to Sh1.57 trillion in October from Sh1.56 trillion in September mopping up more cash from circulation.
This also comes at a time interest rates on loans remain high which has discouraged individuals and households from taking loans.
The apex bank last year gradually raised the Central Bank Rate (CBR) to 8.75 per cent from 7 per cent to tame inflation.
A number of banks have subsequently raised their interest rates.
