A friend this week asked me to comment about the central bank’s decision to lower the clearing value of cheques from Shs 20 million to 10 million. As a businessman, the find wanted to know how this will impact on his business.
In simple terms, the bank’s decision means you can no longer write a single cheque above Shs 10 million. If you wanted to pay someone any monies above Shs 10 million you would then have to write more than one cheque.
For example if you wanted to pay some one Shs 15 million, you would have to write a cheque for Shs 10 million (the limit) then another for Shs 5 million.
Does this mean you can no longer pay someone above Shs 10 million? No it doesn’t, you can still pay them but it would be easier doing so by electronic transfer.
In my opinion this is a policy move to have people embrace digital banking and slowly phase out cheques at some point. Why write a cheque if you both have accounts and money can be wired from one account to another directly.
This move is to encourage that by making it a little more tedious and expensive to use cheques hence making it less appealing.
If you have to for example pay someone Shs 100 million, you would have to write 10 separate cheques.
I heard someone say to themselves that’s too much work, yes it is and that’s what they are trying to do. Make it too much work hence less appealing.
Don’t also forget cheques have a clearance fee, if it costs for example Shs 2,000 clearing a cheque it would then mean you’d part with Shs 20,000 for 10 cheques to the same person for the same payment yet an RTGs for examples costs you nothing for an inward transfer (using stanbic bank rates) .
It also means few people were writing cheques above 10M anyway. Most people write cheques of 1M to 5M. A huge volume of bulk cash transactions are in cash.
To digress a bit, someone once called me to help them with a land payment.
They live and work in Europe. They told me they had sent money before through relatives and they just misused the money.
He told me since we had worked together for some time he had come trust me. He told me he was trying to buy some land and the sellers insisted that he carries Shs 30 million in cash.
So he wanted me to receive this money and I pay the sellers on his behalf, at a small fee.
Who says no to making money? I did not and everything went well.
The fact that the sellers wanted the money in cash was the sticking point for the buyer and I told him unlike in Europe where he lives, that’s the reality of our economy.
It is still highly a cash economy so this is what this policy seeks to change long term by encouraging a more digital approach to financial transactions.
Jaluum Herberts Luwizza is a Speaker,Writer and Business Columnist with the Nile Post.He is also a Business Consultant at YOUNG TREP East Africa’s No.1 Business Management and Consultancy firm that helps people start and grow profitable businesses and YTS Associates Certified Public Accountants.
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