Cash Circulating Outside Banks Increases

Kevin Namunwa | Sep 10, 2020

Data from the Central Bank of Kenya (CBK) has revealed that the value of cash circulating outside banks has increased by 4%.

The value of cash circulating outside the banking system rose by Ksh 8.22 billion to Ksh 219.08 billion July. The CBK data shows that cash circulating has now risen to a 14-month high, the third consecutive rise in several months.

Similarly, cash available for withdrawal in banks also rose by 2% to an all-time high of Ksh 1.379 trillion in July from Ksh 1.349 trillion in May last year. This indicates that people have been looking to have their money within easy reach.

When the amount of money circulating outside banks increases, it shows that savings rates are low. Kenyans have not been saving especially during the period of the pandemic.

Over the period savings rate fell further to 4.11%, being the lowest level since December 2019.

The low returns on savings act as a catalyst for people to save less and cash out on their savings and opt to hold their cash in assets with better returns.

In March CBK cut the cash reserve ratio for banks to 4.25% from 5.25% and has cut the benchmark rate to the current seven percent to improve liquidity and lending.

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