Central Bank of Kenya Limits Sale of Dollars by Money Remittance Companies

The Central Bank of Kenya has placed a restriction on the sale of dollars to individuals through money transfer companies.

Reuters reports that recent directives have limited money remittance companies from selling sums that exceed $100,000 daily to an individual. Any amounts above this capping limit can only be transacted between these remittance firms and commercial banks. The CBK has taken this corrective action after it uncovered that some remittance companies were engaged in wholesale foreign currency dealings without abiding by established rules or codes regulated for the sector.

Large business owners may be affected by the recent changes as they are no longer able to rely on money remittance companies to handle their dollar needs. These companies provide remittance services to individuals living abroad who send money back home. In March 2023, diaspora remittances increased to Sh48.1 billion from Sh41.7 billion, making remittance one of the primary sources of dollars for Kenya.

The sale of the US dollar is being regulated due to the decline of the local currency caused by inflation and increased dollar demand from manufacturers. The dollar’s current selling price is Sh146.76, based on indicated rates from the CBK on September 14. Despite the government having initiated a deal to import fuel on credit, the significant amount of dollar-dependent loans taken last year by oil marketers is adding pressure on the shilling. Oil dealers paying their loans means a prevalent need for dollars within the oil industry, further offsetting the gains from the fuel import arrangement.

The oil marketers and local lenders exchanged Kenya shillings for dollars in a currency swap transaction which involved loaning each other money and agreeing to pay back the amounts at a specified date and exchange rate. The deal will be closed out by swapping again at either the original exchange rate or another pre-agreed rate.