Central Bank Governor says Kenya not ready for virtual currencies

Central Bank of Kenya (CBK) Governor Patrick Njoroge has again warned that the country must go slow in adopting digital currencies.

This is because Kenya currently doesn’t have systems and capabilities to handle virtual currencies. The CBK is yet to come up with proper policies to regulate these form of currencies such as Bitcoins, also known as currency of the Internet.

The CBK is yet to come up with proper policies to regulate virtual currencies such as Bitcoins.

Dr Njoroge was speaking at the monthly interactive forum ‘Mind Speak’ hosted by investment analyst Aly Khan Sachu at a Nairobi hotel. He was responding to a question by one of the participants who wanted to know how far CBK had reached in putting up mechanisms to adopt virtual currencies.

Unregulated

Last year, CBK announced cautionary measures on using virtual currencies like Bitcoin, dismissing it as a form of unregulated digital currency that is not issued or guaranteed by any government or central bank. CBK had also linked the use of bitcoin and other illegal tenders in Kenya to terrorism and money laundering due to the untraceable nature of their transactions.

The governor said this year, the economy is expected to grow by six per cent, up from 5.6 per cent in 2015. The growth, he added, would be fueled by agriculture which is doing well because of better rains and tourism.

“While other countries in Sub-Sahara are expected to register slacken growth, we will do well given we are not a single commodity exporter like countries such as Nigeria and Angola that depend on oil or Zambia which depends on copper. Our exports are diverse and our economy is resilient even as the global economy is expected to grow at a slow rate of 3.2 per cent,” Njoroge said.

He also emphasized that currently, our biggest export was tea, of which our biggest market is Egypt. He hailed this as a positive development since Kenya doesn’t rely heavily on European or Asian markets.

“About 40 per cent of our exports go to the Common Market for Eastern and Southern Africa (Comesa) countries. This is good since we have a strong foothold in regional markets which are stable,” Njoroge said.

He is also optimistic that 2016 would be a recovery year for the country, given the tumultuous economic times Kenya went through last year. “Our current account deficit is going down. In 2014, it was 9 per cent, it slowed to 6 per cent in 2015, and this year it has decreased to 5.5 per cent. This goes to show that we are on the right track,” the governor said.

Njoroge lambasted banks that are not classifying their non-performing loans well, saying that they project a healthy balance sheet to hoodwink potential customers and investors.

“When banks don’t classify their non-performing loans well, they in turn don’t provide resources to cover these loans, which leads to balance sheets that do not tell the whole truth about the financial positions of these banks,” the governor said.

To curb this, Njoroge announced that CBK has developed three pillars which will be used to instill discipline in banks: transparency, good governance and effective business models.