The De La Rue cash printing facility in Nairobi. PHOTO | AFP

Kenyan banks are dealing with a logistic disaster of supplying clients with cheques after dominant banknotes and safety printer De La Rue introduced plans to freeze native operations from March 31.

The banks are scrambling to hunt various printers because the lenders advise their clients to stockpile cheques after the multinational made the shock announcement on January 20 to droop operations on low enterprise.

The strikes by the native banks will stoke the controversy over the way forward for cheques as their recognition falls considerably in favour of digital cash transfers, debit and bank cards as properly cellular cash companies like M-Pesa.

Fairness Group has requested clients to make bulk orders for chequebooks as they search a substitute for the multinational that dominates a enterprise that has different gamers reminiscent of Sintel Safety, Punchlines Ltd, Ellams Merchandise and Tally Options.

The lender has requested its clients to position ample orders lasting a minimal of six months as Absa Kenya places an analogous discover on Thursday as its mulls over searching for orders from South Africa.

KCB reckons it’s going to fall again to different distributors within the wake of the freeze discover from the UK safety printer.

Citi Financial institution has requested its shoppers, primarily corporates and rich people, to make satisfactory chequebook orders by subsequent Tuesday and can stop providing bankers cheques following De La Rue’s transfer.

“Purchasers who at the moment use cheques for his or her operations are suggested to make orders for extra inventory as quickly as doable and by 28 February 2023 on the newest. We will sadly not have the ability to course of orders acquired after this date,” stated Citi Financial institution in a discover seen by the Enterprise Day by day.

Learn: De La Rue sheds 300 Nairobi jobs, fights Sh1bn KRA judgment

“Citibank will discontinue providing company and banker’s cheque issuance companies as a part of our product portfolio upon the expiry of the acceptance interval for the De La Rue printed cheques”

However whereas many companies have gone gradual on accepting cheques, they’re nonetheless a preferred type of cost amongst aged folks, a lot of whom fret at utilizing playing cards or digital transfers.

Within the UK, the way forward for cheques was unsure a couple of years in the past when the funds trade mentioned phasing them out by 2018, but it surely was compelled right into a change of coronary heart by MPs who stated no viable alternate options for the susceptible and aged have been in place.

In Kenya, the utilization of cheques has slowed down within the final decade, dropping out to digital cost channels that are extra environment friendly for companies and people.

Whereas the worth of cheques went up from Sh2.05 trillion in 2011 to Sh2.55 trillion final yr, the quantity issued within the funds fell from 18.2 million to fifteen.69 million within the interval, says the Central Financial institution of Kenya (CBK).

In the meantime, the amount of money transacted by way of cellular cash brokers rose by almost six instances to hit Sh6.87 trillion in 2021, from Sh1.17 trillion in 2011.

Bulk funds made by way of real-time financial institution transfers have additionally gone up by a big margin, from Sh21.9 trillion in 2011 to Sh34.55 trillion in 2021. “At a broader degree, cheque volumes and values proceed to fall, as people and companies make larger use of digital cost devices, significantly in the course of the Covid-19 pandemic,” stated the CBK.

De La Rue says its Nairobi plant had the capability to print 60 million cheques in a yr.

Moreover the lowered use of cheques, De La Rue additionally suffered from a lowered want for brand spanking new banknotes—its core operation in Kenya.

The worldwide agency, which prints notes for Kenya by way of the native three way partnership that’s 40 % owned by the Kenyan authorities, will launch the final lot of staff by March.

The agency stated it doesn’t anticipate any banknote printing order from the CBK for not less than the following 12 months on account of low market demand.

Whereas Kenya has struggled to retain and appeal to multinational producers, it has lately turn into a magnet for know-how companies and monetary service corporations searching for a hub for a bigger share of the African market.

On De La Rue Kenya, a number of staff who’ve since been launched advised the Enterprise Day by day that the banknote printer has shed jobs since mid-last yr, culminating within the layoff of 300 staff.

De La Rue late 2018 received an £85 million (Sh13 billion) tender to design and manufacture Kenya’s new foreign money era notes because the nation moved to take away the faces of people from its foreign money.

“The difficulty of know-how can be affecting us as a result of, with cellular banking, the demand for safety paperwork has dropped,” stated a De La Rue employee.

The agency’s authentication division provides a variety of bodily and digital options reminiscent of tax stamps, cheques and financial institution playing cards.

Freezing Kenyan operations means De La Rue will now be left with three banknote websites — UK, Malta and Sri Lanka — down from 4 at first of the yr and 5 in 2020, highlighting the declining demand for banknotes globally as digital transactions acquire traction.

De La Rue has been working in Kenya for over 25 years the place it serves different markets reminiscent of Tanzania, Uganda, Zambia and Rwanda.

“De la Rue is a significant participant when it comes to a safe, tried and examined flagship. Will probably be attention-grabbing to see which different participant will step as much as fill the hole,” stated a high financial institution government who sought anonymity.

De La Rue’s outcomes for the six months ended September 2022 confirmed income from the Kenyan unit had dropped by 58 % from £1.2 million (Sh184.5 million) to £0.5 million (Sh76.9 million) on lowered income, highlighting the affect of low enterprise.

Learn: De la Rue’s bid to overturn Sh1.1 billion tax declare flops

Revenue for the complete yr ended March 2022 had additionally dipped from £3.1 million (Sh476.6 million) to £2.2 million (Sh338.3 million).

The Treasury earned £0.9 million (Sh138.4 million) from De La Rue’s full-year revenue for the 40 % stake it acquired at £5 million (Sh768.7 million) in 2019.

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