Abstract:

The study is a critical review of the impact of demonetization on Kenyan economy. The main comparisons are based on Indian economy. Theoretical literature has endeavored to define demonetization and its dimensions. Empirical literature has mainly documented the impact of demonetization in Indian economy. The study had three objectives namely: Establishing the meaning and reasons for demonetization, determining sector-wise impact of demonetization and establishing positive and negative effects of demonetization in Kenya. Research methodology was a descriptive study using secondary data. Findings indicate that demonetization in Kenya largely entailed replacement of Kes1000 note with a new one with enhanced security features, retaining of all the other old currencies and introducing other new currency notes with enhanced physical and security features as provided for by the Constitution of Kenya, 2010. Apart from fulfillment of a constitutional requirement, demonetization project in Kenya also aimed at curbing black money and corruption in the economy. Secondly, the findings indicate that demonetization project in Kenya has mainly targeted the real estate and property sector, retailing sector, banking sector and digital payment platforms. Thirdly, findings indicate that the short term impact of demonetization in Kenya is on personal finance, black money and terrorism while the long term impacts are likely to be felt in tax filing and collections, growth in GDP and expansion of MSMEs.

Keywords: Demonetization, Impact, Kenya

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