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Thursday, September 28, 2023

CBK tightens rules on dollar sales through money transfer firms


The Central Bank of Kenya (CBK) has implemented new restrictions on the sale of US dollars to individuals through money transfer companies, according to a Reuters report. Under the new guidelines, money remittance firms will no longer be permitted to sell more than $100,000 per day to any individual.

The CBK’s decision to limit dollar sales through money transfer companies comes in response to concerns that these firms have been engaging in wholesale forex exchange activities without adhering to the established guidelines, standards, and codes that govern the sector.

In a statement, the CBK explained the rationale behind its decision, which restricts sales above the $100,000 threshold to commercial banks. This shift is expected to have implications for individuals and businesses, particularly those engaged in substantial operations.

Approximately 11 money remittance companies are licensed by the CBK to operate in Kenya. These companies are crucial in facilitating remittances from Kenyan diaspora communities abroad, allowing individuals to send money back home.

Recent data from the CBK reveals a notable increase in diaspora remittances, with figures rising from Sh41.7 billion to Sh48.1 billion in March 2023. Remittances have become a significant source of foreign currency for Kenya, outpacing growth rates seen in neighbouring countries.

As Kenya’s diaspora population continues to expand, the money remittance sector has witnessed substantial growth, with companies extending their services across various continents. This surge in remittance activity prompted the CBK to revisit and regulate the sale of the US dollar.

The move to tighten regulations on dollar sales through money transfer firms also coincides with heightened demand for the dollar in Kenya. Factors such as increased demand from manufacturers and rising inflation have placed downward pressure on the local currency.

According to CBK’s indicative rates for Thursday, September 14, the US dollar is currently selling at Sh146.76.

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