D-Day for phase out of Sh1, 000 old notes is here

By Steve Umidha

All the old Sh1, 000 notes will cease to be legal tender by close of business today and as such all bank notes not yet converted will become worthless pieces of paper.

Kenya’s Central Bank has vowed not to extend the deadline and promised to destroy all the old notes collected as the final stage in the four-month demonetization process that officially ends Monday – this despite having not met its target.

In June this year, Kenya fired a direct shot at the nation’s endemic corruption: by issuing a new generation of banknotes. In a surprise move, the government announced the 1,000 shillings ($10) note will be discontinued by October 1 in a bid to fight corruption, counterfeit, and money laundering.

As of 1st October 2019, over 200 million 1,000 shillings notes – the largest denomination of the country’s currency — in circulation will be discontinued after a four-month phase out.

Demonetization has been used by developed and developing countries alike as an administrative instrument to improve the central bank’s management of currency in circulation.

In theory, demonetization allows for adjustments in the quantity of money in circulation and reduces the chances of counterfeiting.  It also aims to encourage individuals holding funds in the black market to give up their holdings, and helps tax authorities in detecting funds once this “black cash” is deposited in the banking system.

To curb illicit financial flows and counterfeit notes — one of the core aims of Kenya’s recent demonetization drive.