Introduction to the Kenyan Shilling
Let me start by telling you that the Kenyan shilling, or KES, is the official currency of the Republic of Kenya. It's divided into 100 cents, and you'll often see prices marked with the abbreviation KSh, like '100 KSh' for 100 shillings. In foreign exchange trading, it's known simply as KES.
Key Takeaways
- The Kenyan shilling (KES) is the national currency of Kenya, an African nation.
- KES stands out as one of the most stable currencies in East Africa.
- It circulates in nearby countries as a reliable option for storing wealth compared to local currencies.
Understanding the Kenyan Shilling (KES)
You should know that back in 2009, the KES/USD exchange rate was about 75 shillings per U.S. dollar, but it weakened over the years to around 104 shillings per dollar in 2015 and 2017. Since 2016, it's been hovering near the 100 mark against the dollar, with concerns rising about Kenya's growing public debt. As of December 28, 2023, one USD equals roughly 157 KES.
I want to emphasize that the Kenyan shilling is among the most stable in East Africa. Though less volatile than others in the region, its exchange rate has generally weakened against the U.S. dollar over the past decade.
The Kenyan shilling was first introduced in 1966 to replace the East African shilling, which had been used in British-controlled East Africa from the 1920s until the early 1960s, when Kenya and other countries gained independence. Due to recent constitutional changes in Kenya that forbid portraits of individuals, new banknotes and coins started being issued in 2018.
The Central Bank of Kenya manages the currency and lets its exchange rate float freely in the global forex market. Their mandate is to maintain price stability, ensure liquidity in the financial system, and support growth and employment.
KES and Kenya's Economy
Understand that the value of the Kenyan shilling relative to other currencies depends significantly on how individuals and organizations view assets in shillings. This is influenced by perceptions of Kenya's economic growth and stability from trading partners.
According to the World Bank, Kenya's economy was stagnant in recent years, but its annual GDP growth rate climbed to 5.8% in 2016, making it one of the fastest-growing in Sub-Saharan Africa, though it dipped to 5.4% in 2019. This growth comes largely from increases in tourism and infrastructure investments.
World Bank data also indicates that Kenya's gross national income per capita, in U.S. dollars, doubled between 2006 and 2016, and the nation's GDP more than doubled from $25.8 billion to $70.5 billion in that period. However, Kenya's public debt now stands at 60% of national output, up from about 40% in 2013.
M-Pesa
Let me explain M-Pesa to you—it's a mobile banking service that lets users store and transfer money via their mobile phones. Introduced in Kenya as a way to give the population access to financial services, it was launched by Safaricom, the largest mobile operator there, in 2007. The name blends 'M' for mobile and 'Pesa,' which means money or payment in Swahili.
Cash from M-Pesa is deposited into bank accounts held by Safaricom, which function like regular checking accounts and are insured up to a maximum of 100,000 KES—or about $1,000—by the Deposit Protection Fund.
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