Central Bank Governor Dr. Patrick Njoroge was before Parliament this week, to answer questions on why he has made withdrawing money from banks close to impossible.
Apparently, Dr. Njoroge recently introduced rules which have put the bank withdrawal cap at Kshs 1 million; withdrawing anything beyond that is a tall order.
Dr. Njoroge’s argument is that, the move is aimed at cabbing withdrawal of corruption proceeds from our banks like it happened with the infamous saloonist Josephine Kabura and her sacks of cash at Family Bank during NYS 1 of 2015. Those days of kizungu mingi and catwalking.
Whereas Dr. Njoroge’s intentions may be noble and genuine, the tactic is wrong.
To begin with, in modern day Kenya, Kshs 1 million is way too little money to be the cap. You will agree with yours truly that, very many business people and investors need to transact more than Kshs 1 million in a normal business day.
Even a sizeable number of small and medium enterprises owners transact more than Kshs 1 million a day. An ordinary hardware owner in a city outskirt easily transacts more than Kshs 1 million. You don’t need to be a Havard trained Economist to know this.
Therefore, the effect of Dr. Njoroge’s rules is that, Kenyans are now avoiding banks like a plague. People are going for mattress accounts. You need to keep your money where you can access it and do business. As a result this is gradually denying banks float to lend to potential borrowers.
Secondly, the move has also drastically lowered the liquidity and cash flow of the economy. If those with money in banks can’t access it, how then will it get to flow in the economy?
Thirdly, even if the rules were meant to fight graft, then the move is dead on arrival. It is extremely hard for banks to identify proceeds of corruption deals simply because it has been deposited with them. The corrupt are not that stupid. They try their best to cover their trail so that by the time the money gets to bank, they have all the necessary papers.
And if anything, thousands of people do genuine business with government. How do you identify which money is from corruption at the bank level unless the scandal has been unearthed? Banks are at the tail bottom of the corruption chain. They are actually the last recipients of the cash after it has gone through tens and tens of government procurement procedures. There is the floating of a tender, submission of bids, shortlisting of companies, award of the tender, execution of task, completion clearance and then a whole long IFMIS process of clearing payments. Therefore if we were to nab corruption cash, let us do it at the mother stages. Otherwise, we focus on banks, we shall achieve very little.
In conclusion, while Dr Njoroge imagines he is helping the economy by introducing draconian rules, he is actually hurting it.
Let Dr Njoroge allow Kenyans to transact their money freely and in peace. After all it’s our money.