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The Central Bank of Kenya (CBK) (Swahili: Banki Kuu ya Kenya) is the monetary authority of Kenya. Its head office is located in Nairobi. CBK was founded by in 1966 after the dissolution of East African Currency Board (EACB). Dr. Patrick Ngugi Njoroge is current Governor of CBK and Sheila M’Mbijjewe is the Deputy Governor.
The Central Bank is the banker for the government, encompassing the national government, government ministries, departments & agencies (MDA’S) and county governments. These institutions hold a variety of accounts with the Central Bank, depending on their needs, which allow them to receive deposits and make payments. The Central Bank monitors these accounts to ensure that the institutions aren’t at risk of overdraft, and also advises the institutions on financial matters.
The Central Bank of Kenya was established in 1966 to, amongst other functions, act as banker to the Government as stipulated under Section 4(a) of the Central Bank of Kenya Act Cap 491.
CBK Act CAP 491 states as follows:
4A. (1) Without prejudice to the generality of section 4 the Bank shall:
(a) formulate and implement foreign exchange policy;
(b) hold and manage its foreign exchange reserves;
(c) license and supervise authorised dealers;
(d) formulate and implement such policies as best promote the establishment, regulation and supervision of efficient and effective payment, clearing and settlement systems;
(e) Act as banker and adviser to, and as fiscal agent of the Government; and
(f) Issue currency notes and coins
In subsection (1) (d), “clearing” means the process of transmitting, reconciling and confirming payments prior to settlement, including the netting of payments and the establishment of net positions for settlement; “payment system” means a system of instruments, procedures and rules for the transfer of funds among system participants; “settlement” means an act that discharges financial obligations between two or more parties.
Banking Services to the Government
The Central Bank is the banker for the government, encompassing the national government, government ministries, parastatals and county governments. These institutions hold a variety of accounts with the Central Bank, depending on their needs, which allow them to receive deposits and make payments. The Central Bank monitors these accounts to ensure that the institutions aren’t at risk of overdraft, and also advises the institutions on financial matters.
Services to the Government
The Central Bank of Kenya maintains various accounts for Government Ministries, which include:
Government Departments that hold accounts in the Central Bank for purposes of funding by the Exchequer Accounts include
• The Judiciary • Public Prosecution • Kenya Anti-Corruption Commission (KACC) • Independent Electoral and Boundaries Commission (IEBC) • Teachers Service Commission (TSC) • Public Service Commission of Kenya • Commission on Revenue Allocation (CRA) • Truth, Justice and Reconciliation Commission (TJRC) • Parliamentary Service Commission (PSC)
Kenya Revenue Authority
As a parastatal, the Kenya Revenue Authority (KRA) houses its main tax collection account at the Central Bank. While select commercial banks are authorised to hold collection accounts on behalf of KRA, allowing the general public to conveniently make tax payments, money collected in those accounts is deposited into the main account at the Central Bank.
Because the tax collection account is held at the Central Bank, funds deposited into the account cannot be interfered with. Once payments are deposited into the KRA account, they can only be transferred with permission from the Ministry of Finance.
Management of Kenya Revenue Authority Accounts
As a government agency, the Kenya Revenue Authority (KRA) houses its main tax collection accounts at the Central Bank. While select commercial banks are authorised to hold collection accounts on behalf of KRA, allowing the general public to conveniently make tax payments, money collected in those accounts is deposited into the main accounts at the Central Bank. Because the tax collection accounts are held at the Central Bank, funds deposited into the accounts cannot be interfered with. Once payments are deposited into the KRA accounts, they can only be transferred with permission from The National Treasury.
Management of Kenya Revenue Authority Accounts
The Central Bank holds the following categories of accounts for Kenya Revenue Authority:
• Tax Collection Accounts – These accounts contain all main tax collection accounts. • Tax Refunds Accounts – These accounts are used by KRA to make refunds to tax payers who either have overpaid tax, or have paid while they are exempted from paying. • Agency Collection Accounts – the KRA Act allows the Authority to act as an agent for body corporates, including to collect revenues on their behalf for the purpose of achieving economies of scale.
For this reason a number of government agencies have appointed KRA their agent for collecting revenue due to them.
On a daily basis, balances in the tax collection accounts are given to the National Treasury to enable them make timely decisions on revenue allocations for voted expenditure.
Banking Services to the County Governments
The County Governments, which comprise the County Executives and County Assemblies also maintain various accounts at the Central Bank of Kenya which include:
County Projects Accounts
County Assembly Accounts
These accounts are used to facilitate receipt and payment of funds in accordance with the Public Finance Management Act.
Banking Services to Commercial Banks and Microfinance Banks
The Central Bank provides the following services to Commercial Banks:
Maintains accounts to enable commercial banks to effect and receive payments from other commercial banks, the government and other external financial institutions in Kenya shillings and foreign currency.
Provides a Real Time Gross Settlement (RTGS) system to enable commercial banks settle their interbank obligations on a real time basis.
Provides liquidity through the Intra-day Liquidity Facility (ILF) and the Overnight Loan Facility. These loans are secured by government securities.
Hosts the Kenya Bankers Association’s Automated Clearing House (ACH).
Facilitates completion of commercial banks and microfinance banks external audits by providing confirmation of balances in their clearing accounts and cash reserve ratio accounts in our books to their external auditors.
Provision of the Daily Interbank Money Market Report, this is a summary of daily borrowings among commercial banks in the interbank market and guides the industry in pricing interbank loans.
Banking Services to the East African Community
The Central Bank also provides some services for the East African Community currently comprising of Kenya, Uganda, Tanzania, Rwanda and Burundi, facilitating payments, including the exchange of currencies, between countries.
Services to East Africa
The East African Community (EAC) is the regional inter-governmental organisation grouping the Republics of Burundi, Kenya, Rwanda, Tanzania, and Uganda with its headquarters in Arusha, Tanzania. The Treaty for Establishment of the East African Community was signed on Nov. 30, 1999, and entered into force on July 7, 2000, following its ratification by the original three partner states – Kenya, Tanzania and Uganda.
The Republics of Rwanda and Burundi acceded to the EAC Treaty on June 18, 2007, and became full Members of the Community with effect from July 1, 2007.
The Central Bank of Kenya provides the following services for the EAC Central banks:
• Maintenance of EAC Central Banks’ A/Cs • Facilitating of payment instructions • Confirmation of balances in their accounts held at The Central Bank of Kenya • Provision of Specimen Signature Mandate cards for nomination and authorisation of A/C
The Central Bank offers Internet Banking services to government ministries, departments & agencies, County Executives & County Assemblies, as well as Commercial & Micro-Finance Banksallowing them to monitor and manage their accounts online.
Bank History Introduction
The Central Bank of Kenya was established by an Act of Parliament of March 24, 1966 and opened its doors to the public on September 14, 1966. The Bank is now anchored in the Constitution under Article 231. The mandate of the Bank is to formulate and implement monetary policy that promotes price stability, fosters liquidity, solvency and stability of the banking sector, issue currency notes and coins, and provide banking services to the Government, commercial banks and other financial institutions.
Prior to establishment of Kenya’s central bank, the East African Currency Board (EACB) undertook the role of currency issuance in the entire East African region throughout the colonial period to independence. Prior to Kenya’s independence in 1963, the East African Currency Board (EACB) published a report advising the three countries of Kenya, Uganda and Tanganyika to establish an East African Central Bank to act as the banker to governments — the bank was to provide banking services for the commercial banks, to smoothen financial fluctuations, and to function as an instrument of official monetary policy.
At independence, the EACB started performing some central banking functions in the absence of one. They provided credit to the government and were authorised to lend to commercial banks for crop financing. However, the board’s functions could not match those of a central bank. The concept of a single central bank began being mooted though it did not succeed. This then led to the establishment of the three East African country central banks of Tanzania, Uganda and Kenya.
The bank’s executive management team comprises the governor, deputy governors and heads of departments. The governor assumes the role of Chief Executive Officer of the bank and is therefore responsible for its overall management. The governor is also the bank’s official spokesperson.
Prof. Njuguna Ndungu was appointed Governor in March 2007. He transformed the Monetary Policy Advisory Committee (MPAC) into the Monetary Policy Committee (MPC) in 2008 to give it executive powers to formulate monetary policy. He oversaw the rollout of mobile payment services that revolutionized access to financial services in Kenya thereby enhancing financial inclusion especially to the unbanked and under-banked population. He also oversaw the introduction of the agency banking, credit reference bureaus, and the development of the infrastructure bond programme in collaboration with the Treasury.
Dr. Andrew Mullei (March 2003 – March 2007)
Dr. Andrew Mullei’s was appointed Governor in March 2003. His tenure was characterized by measures to promote greater efficiency and effectiveness of the payment, clearing and settlement system. The CBK implemented the Kenya Electronic Payments and Settlement System (KEPSS), the country’s Real Time Gross Settlement (RTGS) System in 2005. Implementation of KEPSS mitigated the risks associated with the previous paper-based inter-bank settlement system. He oversaw the operationalization of the Monetary Policy Advisory Committee (MPAC) in 2004 and the introduction of the Central Bank Rate (CBR) in 2006.
Nahashon Nyagah (April 2001 – March 2003)
Mr. Nahashon Nyagah was appointed the sixth Governor in April 2001. He spearheaded the programme to promote and support development of government bonds market in Kenya. The initial objective was to lengthen the maturity profile of securities in the domestic debt portfolio in order to minimize refinancing risks associated with short-term debt and deepen financial markets. He established the Market Leaders Forum (MLF), a consultative forum that advised the CBK and the Treasury on bonds issuance, price and tenors and other matters relating to the government securities markets. This initiative revitalized the government bond programme and the debt portfolio skewed in favor of bonds over bills. The dominance of the longer dated government securities resulted in significant reduction in Treasury bill rates thus exerting downward pressure on market interest rates.
Mr. Micah Cheserem was appointed Governor in July 1993, at a time when the economy was facing some serious challenges including high inflation and high interest rates, low reserves and a volatile exchange rate. The CBK took decisive steps to restore stability in the financial sector, which included amending the Central Bank of Kenya Act, 1996, granting the CBK operational autonomy in the conduct of monetary policy, and including price stability as one of CBK’s primary objectives. The CBK also began the first steps towards modernizing the National Payments Systems, with the automation of the Nairobi Clearing House in 1998.
Mr. Eric Kotut was appointed Governor in January 1988. Under his leadership, the CBK took several steps towards liberalization of the financial sector, notably elimination of interest rate and foreign exchange controls. The Banking Act was further revised to increase CBK’s supervisory powers and broaden its responsibilities.
Mr. Philip Ndegwa was appointed Governor in December 1982. During his tenure, liberalization of the country’s economy was introduced. Owing to the Government Policy of transferring economic activity into the hands of indigenous Kenyans, the banking sector witnessed a large number of new entrants. Challenges within the banking sector led to the amendments to the Banking Act in 1985, primarily to protect small depositors. In addition, the Deposit Protection Fund Board (DPFB), a deposit insurance scheme to provide cover for depositors and act as liquidator of banks, was also introduced.
Mr. Duncan Ndegwa was appointed Governor in May 1967. He led the Central Bank in receiving its first Special Drawing rights (SDRs) allocation based on Kenya’s quota in the IMF. During his tenor, Kenya enacted the Banking Act 1968, to enhance the functions of the CBK. He also oversaw the expansion, enhanced penetration and diversification of the banking and financial sector.
Dr. Leon Baranski (May 1966 – May 1967)
Dr. Baranskiwas appointed the first Governor in May 1966, on secondment from the International Monetary Fund (IMF). During his one year tenure, the CBK commenced operationalizing the CBK Act, assumed responsibility for monetary policy and management of the country’s external assets to nurture the emerging banking sector. The CBK also embarked on developing and issuing new currency notes and coins, providing banking services to the Government and commercial banks and overseeing the foreign exchange and exchange control operations.
The current deputy governor is Sheila M’Mbijjewe. Former deputy governors include:
Currency History Early Currencies, Trade and Exchange
Before the onset of the modern day currency, Kenya’s communities traded and exchanged goods and services, one to another or using intermediaries that had been accepted for trade. Various items have surfaced from archaeological findings that have shown a thriving trade culture existed in the past. These items found in archaeological sites have helped historians and anthropologists to map out the early trade economies and identify the extent of contact between various communities. Barter trade was one of the primary forms of trade during these early periods.
The African economy as a whole, traded by exchange of goods and services under the Barter trade system. Close communities in Kenya exchanged pastoral and agricultural commodities. Trade caravans which came when the Arabs landed at the coastal towns of Kenya and Tanzania, created long distance trade channels for exchange. Through these special caravans, the exchange of ivory, salt and iron boomed.
Goods from the coast and the Indian Ocean were exchanged for rice, millet and bananas for local consumption while rock crystal, ivory, and rhinoceros horn were shipped overseas. Clothes, ivory and beads were popular items of trade among East African communities. Various trade routes were born linking the different communities and creating new demand and supply chains for various products from the different regions. But, with no clear form of measuring how much a good was worth in exchange of another, the upper hand was left to the trader that was least in need. The lack of common currency facilitated the growth of barter, with communities exchanging what they needed with what they already had in surplus.
The use of proto currencies such as cowrie shells (Cypraea Moneta), cloth, wire and beads in the hinterland began to form a key component of money for exchange during the early periods. It was an advancement of the barter trading system which already had its challenges of sub-division. Proto currencies were a pre-cursor to formal currencies and they were easily portable and divisible, while their utility (largely associated with ornaments) ensured that they were widely acceptable. In fact, by 1902 the half-cent coin was introduced to replace the cowrie (nsimbi), which had been used in Uganda.
Notes and Coins
Early use of currency in Kenya commenced with the Arab influence who were among the first to use currency as we know it. In Muscat, they used a silver coin called the Maria Theresa Thaler (MT$), first minted in Austria in 1741 and, not surprisingly, they continued using it when the Sultanate moved to Zanzibar in 1832. By the 1860s, sailing ships from the relatively recently independent United States of America started to frequent Zanzibar, bringing not only a coarse cloth (merikani) as a commodity but also using the United States Silver dollar.
Around the same period, the silver rupee minted by the British East India Company (1600-1858) was increasingly being used along the Indian Ocean coast as the monsoon-dependent dhow trade with India expanded. These two silver coins were of the same quality but of different weights hence the exchange rate was determined by the quantity of silver in each.
The British chartered company, the Imperial British East Africa Company (IBEA), got the concession to trade in the area referred to as Kenya today. They then issued the Pice, Rupees and Annas as the currency of the region.
However, IBEA went bankrupt resulting in the Foreign Office taking responsibility of the area. A single coin, the copper Pice was minted and was the only piece of currency to bear the name East Africa Protectorate and unlike the Imperial British East Africa (IBEA) coinage which used Latin on the face.
The Indian Rupees and some of the IBEA fractional coins that were silver were still in use and hence easily exchanged with equivalent Indian coins of the same denomination (given weight and fitness).
Penetration of coins and notes only started when construction of the railway commenced in Mombasa in May, 1896, to reach Port Florence – present day Kisumu – in December, 1901. The construction, largely the work of Indian labour meant familiarity with the use of rupee coins and notes. The use of these rupees inland was noted by the different communities, introducing words into their languages for currency. The Pice was the common unit of exchange giving rise to the word “Pesa”. Inland, various ethnic communities adopted the imported terminologies referring to money such as:
Kamba – luvia,
Maasai – iropiyani,
Kikuyu – rubia,
Kipsigis – Robia,
Pokot – Ropyen,
Luhya – Zirupia/Chirupa/tsirupia,
Teso – Irupia,
Luo – rupia ,
Kisii – (off rail) chirupi,
Embu – mbia,
Galla – besa,
Gabbra – besa,
Rendille – besa/silinkini,
Turkana – besa/ng’aropiyae
Somali – laq
Interestingly, the adoption of these new words had not occurred with the foot caravans, which relied on trade good exchange.
After the World War I, the East African Protectorate was not left out in trying to cope with the challenges of the post war, economic environment. Into this confused money market, a decision was made in December, 1919, to replace the Mombasa Currency Board with a London based East African Currency Board (EACB) which would cater for the existing Protectorates as well as the newly acquired responsibility of providing currency to the Tanganyika Trust Territory. The new coins would be for “East Africa”. At the same time, it was considered opportune to change the currency from Rupees and Cents to a currency convertible to sterling, thereby severing the link with India and implicitly reducing the economic strength of the Asian community.
The newly established EACB introduced an intermediate currency based on the English Florin with the thought that it would ease the transformation from Rupee to Shilling. The Florin would be the same size and shape as the Rupee and also be of silver substrate. This then became the advent of the shilling in Kenya. The shilling was however interchangeably used with the pound at a rate of twenty shillings to the pound and eventually only shillings and cents were used to independence.
As the East African territories became independent in sequence from 1962 the EACB ceased to issue notes with the image of the monarch and removed her name from the coinage. There was a desire by the three East African countries to establish a common East African Central Bank. Interim currencies were therefore introduced by the EACB to circulate within the region.
For the banknotes, the interim currency was commonly known as the “Lake Issue” currency because of the background of Lake Victoria on the notes. The notes all showed a dhow on Lake Victoria which was common territory to the three countries. The Lake Victoria designed notes were in the denominations of 5, 10, 20 and 100 shillings. For the first time, use of Hindi on the notes was dropped and Swahili first featured on these common currencies. However, Arabic was retained.
With the establishment of individual Central Banks for the three East African countries, Kenya began printing and minting its own currency under the mandate given to the Central Bank of Kenya in the Central Bank of Kenya Act cap 491. Banknotes for the Central Bank of Kenya, although not yet issued, were legalised under Legal Notice number 252 of 1966 dated 1st July, 1966. Coins were issued in April 1967. EACB banknotes ceased to be legal tender in September, 1967 while the EACB coins were demonetised in April 1969.
The initial issue of Kenya shilling notes were in the denominations of 5, 10, 20, 50 and 100 shillings, all bearing the portrait of the first President of Kenya, Mzee Jomo Kenyatta, in the front, and diverse scenes of economic activities in Kenya at the back. These notes were the first using the double title of Banki Kuu ya Kenya and Central Bank of Kenya.
On April 10, 1967, new Kenya shilling coins were issued in the denominations of 5 cents, 10 cents, 25 cents, 50 cents and 1 shilling. The coins were minted by the Royal Mint of U.K. and made from cupro-nickel. Like the notes, the obverse featured the portrait of Kenya’s founding father, Mzee Jomo Kenyatta. The reverse however featured the Kenyan coat of arms, a theme that has remained a dominant feature to the present series of coins.
Kenya Pre-Independence Coins Gallery
Kenya Pre-Independence Notes Gallery
To mark some national and central banking events, the Central Bank of Kenya has and continues to issue special commemorative currencies. These special currencies are limited in number and are specifically printed or minted to celebrate an event or in honour of a person. They form a historical reference point and memento for the country. Due to their speciality and use of precious materials like gold or silver, these currencies become very unique attracting demand from numismatic collectors or other individuals.
1966 Set of 3 Gold Coins – 75th Anniversary, Birth of First President of Kenya Mzee Jomo Kenyatta:
10 Years of Freedom Single Coin – Brass coin issued to commemorate ten years of independence:
Gold Coins 1978 – Marking the day Daniel Toroitich Arap Moi was sworn in as second President of the Republic of Kenya:
Silver Coins 1978 – Marking the day Daniel Toroitich arap Moi was sworn in as second President of the Republic of Kenya:
20th Anniversary of CBK – Silver Coin commemorating 20 years of the Central Bank of Kenya:
10 Years of Nyayo Era – Silver Coin marking 10 years of leadership by Kenya’s second President, Daniel Toroitich arap Moi:
25 Years of CBK – Silver Coin commemorating twenty five years of the Central Bank of Kenya:
40 Years of Independence Gold Coin 5000 Shillings – Celebration of Kenya’s 40 years of independence in the year 2003:
40 years of Independence Coin and Note – Celebration of Kenya’s 40 years of independence in the year 2003:
40 years of Independence 40 Shilling – This circulating coin was also issued to commemorate 40 years of independence:
50 Years Gold Commemorative Coin – Celebration of 50 years of Kenya’s independence:
50 Years Gold Plated Silver Commemorative Coin – Celebration of 50 years of Kenya’s independence:
50 years Acrylic Block Commemorative Gold Plated Brass Metal Coin – Celebration of 50 years of Kenya’s independence:
Contacts of Central Bank of Kenya
The Central Bank of Kenya NRB, Haile Selassie Avenue
Communication to the Central Bank of Kenya should be addressed to:
Address:Haile Selassie Avenue
Mailing Address:P.O Box 60000 – 00200, Nairobi, Kenya
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