Harsh times: Mobile cash transactions at 20-month low

mobile transactions

The total value of mobile transactions fell to a 20-month low in February. 

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The total value of mobile transactions fell to a 20-month low in February amid a tight money supply in an economy bogged down by effects of high consumer inflation and interest charges on loans.

Fresh data from the Central Bank of Kenya (CBK) shows that the value of mobile deals fell to Sh578.09 billion in February, the lowest in a single month since June 2021 at the height of the Covid-19 scourge when Sh532.63 billion was moved.

This was a two per cent drop from January when Kenyans made mobile payments worth Sh589.3 billion and an 18.3 per cent decrease from December last year when Sh708.06 billion was transacted.

The volume of mobile transactions also declined to 14.82 million in February down from 198.31 million transactions in January and 207.01 million transactions in December 2022.

The slump in mobile transactions reflects a struggling economy where private sector business activities have shrunk amid high-interest rates that have discouraged borrowing thus tightening the money supply in the economy.

For instance, a separate set of data from the CBK shows that commercial banks’ average lending rates rose by 2.2 per cent to 13.06 per cent in February – the highest rate since April 2018 - up from 12.77 per cent in January.

The higher interest rates came after banks adjusted their charges following an increase of the Central Bank rate by 50 basis points to 8.75 per cent from 8.25 per cent in November last year by the CBK’s Monetary Policy Committee in a bid to tame inflation.

The Kenya National Bureau of Statistics monthly survey shows that inflation increased for the first time in three months in February driven primarily by high food, fuel, transport, and power costs.

Inflation climbed to 9.2 per cent in February, coming after it slowed for three consecutive months to hit nine per cent in January.

The sour economic environment for businesses was also reflected in Stanbic Bank’s monthly Purchasing Managers’ Index (PMI) for February which showed the index fell below the 50 neutral mark to 46.6 – the first time it had fallen below the neutral point since August last year.

Four of the five monitored sectors in the survey saw new orders decrease, with particularly sharp falls seen in manufacturing and wholesale, and retail, while agriculture was the only sector where sales increased.

Firms indicated that they had recorded a sharp decline in orders and frequently noted that their customers had pared back spending due to high inflation and a lack of money in circulation.