Dar es Salaam. The Tanzania Bankers Association has advised customers to take personal responsibility in handling the Kenyan currency during the period within which local banks will not be converting it.
The association’s chairman, Mr Abdulmajid Nsekela, confirmed they would not be converting the Kenyan shilling following a directive by the Bank of Tanzania (BoT).
In a circular dated June 7, BoT says it has received a directive from the Central Bank of Kenya (CBK) to suspend all conversion and repatriation of all Kenyan currency as of Tuesday last week.
A similar announcement was made in Uganda on Monday by the Bank of Uganda (BUG), and is likely the scenario in all neighbouring countries.
The order means those wishing to convert Kenyan currency will have to do it in Kenya.
Kenya has rolled out a series of new currency notes and set October 1, 2019 as the deadline for use of the current legal tender. According to the CBK Governor John Njoroge, the move was aimed at mopping from the market billions of Kenyan shillings in illicit flows or funds laundered through proceeds of corruption.
Mr Njoroge was particularly targeting the Ksh1,000 note, which he said had also been largely abused to print counterfeit currency. CBK announced the switch effective June 1, 2019, and has begun issuing the new notes in its market.
Mr Nsekela told The Citizen that what the conversion freeze means is that clients will need to be more careful in dealing with the Kenyan currency to avoid risks. It was, however, still not very clear if local banks will impose a total ban on receiving and banking of the Kenya shilling.
Mr Nsekela said that the BoT circular wants banks to be careful in transacting with the currency and hope customers are well appraised.
In Uganda, Mr Robert Mpuuga, a banker, said they were not accepting 1,000 Kenyan shilling notes but were converting smaller denominations. The 1,000 Kenyan shilling note is the highest currency bill in Kenyan currency.
Kenyans have up to October 1, 2019 to have turned in the older 1,000 note; after that, the older version will be invalid. There is no deadline for turning in the other lower bill notes.
Mr Njoroge said last week: “Illicit financial flows involving the Kenya shilling is not just in Kenya. They also affect our neighbouring countries.”
This suspension has implications for the Kenyan Shilling, with the likelihood of falling in value since people won’t accept to change it.
Alternatively, those with cash will have to carry it across the border to have it exchanged for newer series – a huge inconvenience, but Kenya says it is worth it in its war against corruption and counterfeits.
Kenya says it is fighting corruption as officials are keeping huge sums of money in their homes.
Those exchanging money below Ksh1 million can do it anywhere in Kenya with no need to have a bank account but must have official identification.
Those exchanging money in the value between Kshs 1 million and Kshs 5 million, must do it at their own banks and must have an account there. If they don’t have accounts, they must contact the central bank to give them approval. They must also prove that the money belongs to them.
Those with the amount above Ksh 5 million must contact the central bank. Some Kenyans have rushed to court to challenge the decision. They have mostly been annoyed by the decision to have Jomo Kenyatta’s statue appear on some of the notes. Kenyatta was Kenya’s founding president.
The critics say their 2010 Constitution doesn’t allow the appearance of any individual on new bank notes. The new notes also showcase Kenya’s wildlife.
This is not the first time a country is withdrawing old notes to combat fraud and illicit flows. India did it overnight in 2016. Nigeria and Ghana have also done it before.