Mathira Member of Parliament, Rigathi Gachagua, has explained why there has been a low circulation of money in the country.
Speaking during an interview on a local TV station, Rigathi attributed the low circulation to the bureaucracy surrounding the deposit and withdrawal of money from banks in Kenya.
“We have a serious problem of lack of money in circulation in this country,”
“Some of those regulations have hindered money circulation. We brought too much government into people’s lives. For you to deposit even Ksh1 million in bank you have to explain,” said Gachagua.
The legislator stated that people are skeptical of bank transactions since they may never access their money whenever they want, which is capped at Ksh1 million as per the current regulations.
He also said that people were uncomfortable discussing their wealth and how they would spend their money, as it is not a tradition in the African society.
“You have too much explaining to the clerks, to the manager, and it’s your money. And what has happened is that people have stopped banking,” he added.
According to a circular from the Central Bank of Kenya (CBK) dated January 5, 2016, banks should obtain additional information from customers who transact more than US$10,000 (Ksh1 million).
Some of the information that customers are required to provide include; how the money will be used, in case of withdrawals, the full identity of the direct and direct beneficiaries of the cash, the reason why the transaction may not be done electronically, and also the source of the money involved.
“Thus, with immediate effect, CBK asks institution to obtain the following additional information when handling large cash transactions i.e., cash transactions equivalent to or exceeding US$ 10,000 OR it’s equivalent,” read a section of the circular.
The regulator further authorized financial institutions to file a suspicious transaction report with the relevant authorities should the customer fail to provide the requisite information.
Gachagua says that removing the financial capping or increasing it can give people a reason to bank money and consequently have money circulating in the economy. He proposes the cap be raised from Ksh1 million to Ksh5 million.
The issue of low circulation hit the country harder in the wake of COVID-19, prompting the president to introduce a stimulus program and other measures such as Kazi Mtaani meant to cushion youths from the ravages of the pandemic.
In his Mashujaa Day speech, the president announced an additional Ksh10 billion allocation to finance the third phase of the Kazi Mtaani initiative targeting more than 200,000 youths.
