The value of cash circulating outside the banking system rose by Sh8.22 billion to Sh219.08 billion in July, data released by the Central Bank of Kenya (CBK) shows.
The CBK data shows that cash circulating has now risen to a 14-month high, the third consecutive rise in as many months.
In an earlier interview, Genghis Capital head of research Churchill Ogutu said that most people opted to keep cash at home amid the economic uncertainty in the wake of Covid-19.
“People are opting to be conservative in where they put their money by taking precautionary measures such as cashing out on their savings leading to an increase in cash in circulation,” said Mr Ogutu.
Demand deposits –cash available for withdrawal in banks –rose by two percent to an all-time high of Sh1.379 trillion in July from Sh1.349 trillion in May last year, indicating that people were looking to have their cash within easy reach.
Over the period savings rate fell further to 4.11 percent, being the lowest level since December 2019.
The low returns on savings act as a catalyst for people to save less and cash out on their savings and opt to hold their cash in assets with better returns.
In March CBK cut the cash reserve ratio for banks to 4.25 percent from 5.25 percent and has cut the benchmark rate to the current seven percent to improve liquidity and lending.