Kenyans Under Pressure To Swap Banknotes As Cash Ban Close

Kenyans Under Pressure To Swap Banknotes As Cash Ban Close - Surge Zirc SA
Wrongfooting the cash hoarders / Photo file: AFP

Cash preservers are under pressure in Kenya to push-out the soon-to-be-ban note. Just last week a man reportedly walked into a Nairobi car yard and paid for a luxury Mercedes car with a mountain of 1,000 shilling ($10/9 euros) banknotes just because he doesn’t want the notes to remain with him until the ban date.

As the deadline for Kenyan Central Bank to ban the old notes of 1,000 shilling, rich people who keeps cash in a private save are getting under pressure to find ways to do away with their money before it becomes a waste with them.

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After releasing the country’s new 1,000 shilling banknote print in June, Kenyans were given until September 30th to exchange their old banknotes at the bank or be stuck with bundles of useless cash that can never be spent or exchanged.

Kenya hope it will be able to flush off dirty money that have been hoarded by tax evaders, fraudulent businessmen and criminal associations. Meanwhile, Large deposits of the old banknotes, embossed with the image of Jomo Kenyatta, raised curiosity at banks and requiring paperwork to prove its origins.

Kenya central bank revealed in June that there were about 218 million 1,000 shilling notes in circulation, though didn’t mention what proportion of that amount was being stashed as black money.

Kenyan economist Aly-Khan Satchu said devaluing these bills works by “taking its owners by surprise. Four months is a short period of time when you want to launder big sums of money. People who have that money will definitely try to save what they can”.

The outcome is that people will become more creative, exploiting different mediums to quickly offload their cash while avoiding being detected by the government.

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A car dealership in Nairobi, John said he remembered how a customer walked in to purchase a purchase a luxury car worth $74,000 (67,000 euros), and he was counting out thousands upon thousands of banknotes.

“People want to get rid of their old notes, but they know very well that questions will be asked if they go put the money themselves in the bank,” said John, who refused to disclose  his real name due to the nature of his business he does.

“When I go to the bank to deposit money from a car sale, people ask for the papers from the sale, sometimes even copies of emails, but it never goes further.”

Some businesses are looking for a lucrative side trade in washing 1,000 shilling notes through their tills — for a bit in return.

“I was approached by a friend through another friend and we struck a deal. I get around 500,000 shillings every day to bank together with my daily sales,” said a liquor shop owner who declined to be named in Hurlingham, a district near downtown Nairobi.

“In return I get between five and 10 per cent, depending on the amount.”

The amounts of money that is being deposited are below one million shillings, the threshold at which banks required detailed paperwork under a new transparency policy imposed by the central bank in June 2018.

A certain canny businessman in western Kenya resulted to giving out his cash in the form of small, interest-free loans of around 50,000 shillings each person.

The amounts he gives out are low, so those exchanging the old bills avoid detection, and upon paying back the debt his money comes in new banknotes.

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“Nothing is written down, it is a gentleman’s agreement,” he said, refusing to mention his name.

Other common methods of pushing the old notes out includes sinking cash into real estate or investment funds, or businesses moving large volumes of money, several business people had disclosed to AFP.

A bar in the coastal city of Mombasa offered to swap banknotes on behalf of alcohol consumers, encouraging punters to spend big at their “Old Notes Send Off Party.”

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