The Central Bank of Kenya (CBK) has introduced a significant change in foreign exchange transactions by requiring Money Remittance Providers (MRPs) to sell any daily foreign exchange currency exceeding $100,000 (equivalent to Sh14.7 million) exclusively to commercial banks. This move is aimed at fostering a “fair and orderly” market, as announced by the CBK.
MRPs, which specialize in cash transfers for Kenyan diaspora and handle foreign exchange operations, will now be obligated to redirect any foreign currency amounts surpassing $100,000 to commercial banks. This directive comes as a response to the CBK’s observation of MRPs participating in the wholesale foreign exchange market without adhering to the established guidelines, standards, and codes of conduct.
Gerald Nyaoma, Director of Bank Supervision at the CBK, highlighted the need for this measure, stating, “The CBK has noticed a growing presence of MRPs in the wholesale FX market, operating without the required compliance with industry regulations.”
Under the new regulation, MRPs will be limited from selling foreign exchange exceeding $100,000 per customer per day directly to their clients. Instead, they are now mandated to channel any excess amounts to commercial banks. As a result, MRPs will only be permitted to sell FX above the $100,000 threshold or its equivalent to commercial banks.
Currently, there are 20 institutions licensed by the CBK to engage in both money remittance and forex activities according to Business Daily.
The CBK’s decision could potentially restrict the flow of dollars to other market players, including foreign exchange bureaus regulated by the CBK and businesses or individuals seeking foreign currency without the necessity of going through banks.
It is essential to note that foreign exchange bureaus and MRPs often offer more competitive exchange rates to customers compared to commercial banks.
This development has sparked discussions within the financial sector, with many anticipating a transformation in foreign exchange transactions in Kenya. Banks are poised to benefit significantly from the CBK’s latest directive, although its broader impact on consumers and the economy remains uncertain. Stay tuned for updates as this story develops.
Photo source: standardmedia
By Montel Kamau
Serrari Financial Analyst
17th September, 2023
