So, what next after demonetisation?

"Hard" scientists like physicists, biologists and chemists love experiments, which can be expensive. For instance, the Future Circular Collider used for detecting sub-atomic particles like bosons will cost about €21 billion (Sh2.4 trillion), not far from our annual budget.

Social scientists rarely use such experiments. Instead, they watch events and compare variables before and after. They are led by their high priests - the economists - with their esoteric equations and graphs. The Central Bank of Kenya (CBK) has been usually generous to economists with free experiments. In fact, they should give the CBK boss two goats in good faith for his generosity. The first experiment was on the interest rate cap. The results were mixed. Kenyans did not queue outside banks and shylocks never closed shop.

Instead, banks reduced credit to risky borrowers - read SMEs - who are the key economic players in any economy. Never mind that textbooks create an impression it is the big listed firms that run the economy.

The second experiment in quick succession was on demonetisation of the old Sh1,000 note. The initial surprise on Madaraka Day did not last. Fundamentals support the fact that the market anticipated that. The exchange rate did not move significantly, neither did the stock index. Three months to exchange old notes also reduced the shocks. That was enough time to avoid queues and creatively get the old notes back into the financial system.

The Sh217 billion held in Sh1,000 old notes is about seven per cent of a Sh3 trillion budget. The amount could also be the reason demonetisation was not such a big shock. Again, few of the corrupt people targeted by the demonetisation keep their money in cash. It is quickly shifted to real estate or other hard currencies. A quick look at building permits issued or tonnage of cement before demonetisation could give us insights into such a shift. What of the money exchanged at forex bureaus?

The Sh1,000 old note has a close cousin, the Sh500 note. That should have been targeted, too, for demonetisation to have a bigger punch. It is possible money found its way into neighbouring countries before the announcement. Was demonetisation a success or not? We cannot tell until the CBK gives its report. That does not stop us from speculating or analysing possible outcomes.

The best evidence that demonetisation was a success is finding heaps of old Sh1,000 notes in dustbins or blowing in the wind like plastic papers in the past. If Kenyans exchanged all the notes, the effect might not be felt since the cash in circulation would remain the same. But if lots of hidden money got into the financial system, we could notice a spike in inflation as we try to clear the money.

What are the other indicators? Will the digital economy do better with demonetisation? Can Safaricom report if M-Pesa activities increased after demonetisation? Shall we shift our money to digital storage to avoid the inconveniences of changing notes in future? What of mobile banking? Have we noted significant activities?

What of the Kenya Revenue Authority? Have they reported a spike in taxes paid as we shift our money into the formal system? We can also check GDP growth. Demonetisation reduced growth in India, but that may not apply in Kenya. Many businessmen are complaining there is no money. We cannot conclude that it is due to demonetisation. Success in the war on graft could explain this "shortage" of money, witnessed when President Mwai Kibaki came to power.

Who could have been affected most by demonetisation? It is unlikely to be ordinary Kenyans. The people targeted by demonetisation are the most financially sophisticated, which might reduce its effect. The cost of printing new notes might also reduce the effect of demonetisation.

Where do we go from here? Demonetisation might have sent a signal to fraudsters, terrorism funders or counterfeiters that they are being watched. The ultimate success of demonetisation is more money in the formal sector so that banks can play their intermediation role of connecting borrowers and lenders. Those who have money often do not have the best entrepreneurial ideas.

The money in the economy should be clean, from our sweat, not through rent-seeking. We hope demonetisation with other initiatives will finally tame corruption, which has given Kenya a bad name and made a mockery of hard work and honesty.

To CBK, how successful was demonetisation? Unconfirmed reports indicated it was hard changing the old 1,000 notes in North Eastern, with bribes changing hands.