Why Kenyans rush to cash, when banks go bust

Banking Crisis
Just now, Kenya’s #CoopBankTradingScam is trending on Twitter, and already, people are touting cash as a safer option

“If #CoopBankTradingScam goes on I bet people will panic just like Chase Bank & withdraw their cash. Co-op Bank could collapse by 4p.m!”

Kenya’s current recent banking crisis, if I may call it that, is a long list of 32 banks that fell to the wayside since 1988. Almost always, there is never enough cash to give. The reason is, all the money held in banks is debt, a string of electronic digits that says the bank owes you money. As we transition from cash to electronic money, we face a wider systemic risk.

Why do we clamour for cash when banks go bust ?


The reason we rush for cash is for its one unique quality, it is a bearer asset. When you hold paper money, you are in complete control – possession is ownership. A 1000/- Kenyan shilling note is a great example, unlike a bank IOU, you can access and spend it when you want.

On Tuesday, April 12, during Chase Bank’s receivership aftermath, Commercial banks reported a 50% day to day surge in cash withdrawals in regions outside of Nairobi. Like today, the country’s social media was buzzing with a meme:

“The new bank in town: Sox Bank Limited – your bank on the move No charges on withdrawal”

Bitcoin Pesa

Banks OTOH, do not like Sox, and most certainly filthy cash, so they are ganging up against it unofficially. Behind curtains, the grand plan is underway. A meticulously crafted scheme to rid the world of paper money and transition us to a utopia where cashless transactions are the norm.


Why get rid of cash?

Cash they say, is expensive to print. Why fritter away good money on printing paper? In March this year, CBK Governor Njoroge told the country printing new notes will cost Kshs 18 billion.

In the UK, besides saving on printing costs, the Bank of England prefers a purely electronic money economy for its alternative monetary policy tools. Just like in Japan, the EU, Denmark and  Sweden, economic woes have left no option but to experiment with negative interest rate policies – a charge for holding money. The expectation is, forcing consumers to spend versus saving, will kickstart a sluggish economy. No one knows if it will work.

Perhaps the most cited reasons for eradicating cash is the trio of tax evasion, money laundering and terrorist funding. Earlier this year in February, the European Central Bank was deliberating scrapping the 500 euro note, for its utility in hoarding large sums of money by savers and criminal use. Here at home, the Central Bank of Kenya called it – inherent risk – when it issued new guidelines requiring additional information from customers when depositing or withdrawing large cash transactions.

They want us to put all our money in electronic form, and give up cash.


How safe then, is your electronic money?

Uganda Mobile money

Electronic money, whether in mobile money, credit and debit cards, bank balance or cheques, is not cash. They are electronic IOUs, promises to pay on request, from a debtor to a creditor. In Kenya, this debtor can be a bank, a card company, a SACCO, a microfinance institution or a Telecoms mobile money operator. Once we opt out of cash, we co opt into a system with a systemic risk of failure. Chase Bank of Kenya’s bank run, was a failure to keep that promise.

We are not the only ones. On election day in Uganda, March 12th, nearly 20 million mobile money users woke up to a directive ordering the shutdown of mobile money services.  For 2 and a half days, they were unable to access the service to withdraw money, make payments or money transfers. As soon as the service went live, many users rushed to empty out their mobile wallets. In Cyprus, people lined up outside ATMs to withdraw money in 2013’s banking crisis, while in 2015 Greeks formed long queues outside shrinking bank machines amidst an ongoing IMF-EU bailout deal.

A collective conscious is taking root. In a world full of bank controlled electronic money, can we trust the banking system to keep its word?

What we need is electronic cash. A digital bearer asset.


Bitcoin is electronic cash

bitcoin-electronic-cash.jpgBitcoin,a digital bearer asset, is the only true form of electronic peer to peer cash. Holding bitcoin is equivalent to holding cash in the real world. It is the culmination of 20 years of research into cryptographic money, that all came together at the peak of the 2008 – 2009 financial crisis. Bitcoin was born! This is why it consistently makes the headlines, and why it’s gaining adoption across the world. If you are worried about your money in Kenya’s recent banking crisis, read up on Bitcoin.



  1. Hej widzę że chyba nie zarabiasz na swoim blogu.
    Możesz polaczyc swoją pasje z zarobkiem. Szkoda marnować ruchu na stronie.
    Jest sposób zeby wyciągnąć dodatkowo ladna sumkę,
    wpisz sobie w google; jak zarobić na blogu drugą wypłatę

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