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Sh1bn in coins that Kenyans have ignored

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Summary

  • Despite being a legal tender, many traders no longer accept Sh1 and 50 cent coins in preference for higher value coins and notes, a trend that could eventually make the silver and copper coins obsolete.
  • The latest data by the Central Bank of Kenya shows that the value of coins out of circulation has hit Sh995 million.

For many decades coins were a preferred choice for making everyday ordinary payment transactions, especially for low-value items or charity donations.

Today, however, a lot has changed and in virtually every Kenyan home you will find coins stockpiled in jars, pouches or drawers gathering dust, disregarded and forgotten.

Society has over the years come to discredit the value of coins, driven by the perception that they are weighty and a hassle to carry around, especially considering that there are more convenient alternatives such as mobile money.

But behind this shift is a stark reality that close to Sh1 billion in the denomination of Sh1 and 50 cents now sits locked up and disused in homesteads. The latest data by the Central Bank of Kenya (CBK) shows that the value of coins out of circulation has hit Sh995 million.

Currency in circulation refers to the nominal value of all banknotes and coins held by the public and commercial banks.

In the age where nothing in the grocery list cost less than Sh5, the Sh1 coin is increasingly under threat and condemned to be purse-busting and trouser-sagging, yet useless to carry around. For these reasons, many Kenyans would rather squirrel them away or best give them away in charity and tip jars in supermarkets.

Despite being a legal tender, many traders no longer accept these coins in preference for higher value coins and notes, a trend that could eventually make the silver and copper coins obsolete.

This has led small traders to price their commodities in denominations of fives and tens, contributing to a wave of inflation that is not driven by the market demand-supply forces. Supermarkets have also become tactical in their pricing, to avoid inconveniences that come with giving change of Sh1 coin, as it is rare in circulation.

"I only use one bob to scratch airtime cards. No shop accepts them here. If an egg costs Sh12, then the shopkeeper hikes the price to Sh15," says Margaret Wangari, a resident in Kandara, Murang'a County.

In the case where a trader hikes the price of an egg by Sh3, it means Kenyans like Wangari end up losing Sh90 for every 30 eggs they purchase. If prices of other commodities such as a matchbox, salt, bread and tea leaves are increased to match the ‘preferred’ currency, then many Kenyans could be losing thousands of shillings on a monthly basis.

Inflation — a measure of changes in the cost of living year-on-year — increased to 5.90 per cent in March from 5.78 per cent in February, signaling a painful cost pinch on homes and businesses.

"What can you possibly buy with Sh1 coin? Everything in this country has become expensive. A funeral for these coins has not been scheduled, but it's about time the government realises the Sh1 coil is useless in this economy," says Peris Nyambura, a trader in Githurai.

"Some people might worry that an item that's currently Sh99 would be rounded up to Sh100, but changing that isn't going to cause too much of a problem. Handling small coins is time-consuming and of little value," defends Kelvin Omondi, a shop keeper on Nairobi’s Moi Avenue.

The CBK gazetted the new Sh1, Sh5, Sh10 and Sh20 coins as legal tender in December 2018, replacing portraits of former presidents with images of giraffe, rhino, lion and elephant.

Data from CBK reveals that total value of Sh1 coin amounted to Sh858 million in June 2020, while the 50 cent coins totalled to Sh137 million. This adds up to Sh995 million, the amount that would pay off 76 per cent of the country's debt to the US. Kenya owes the US Sh1.3 billion.

The ignored Sh995 million could purchase 385,000 spacious school desks worth Sh2,500 each, which would help ensure social distancing as per the recommended health protocols to curb the spread of Covid-19.

The unutilised millions could also fund about 22 per cent of the second phase of Covid-19 mass vaccination that targets 9.7 million people and will cost taxpayers Sh4.5 billion.

The National Treasury failed to allocate Sh4.5 billion needed for the second phase of Covid-19 vaccination expected to commence in July, prompting the government to seek Sh10 billion from the World Bank.

The idle cash could also help the National Cereals and Produce Board (NCPB) to purchase some 368,519 bags of maize each at the present rate of Sh2,700 to boost the country's Strategic Food Reserve at a time when millions of Kenyans, especially in the Northeastern region faced starvation.

The Sh995 million could also pay the Sh500 monthly National Hospital Insurance Fund (NHIF) contribution for 1,990,000 Kenyans.

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Expanding digital cash

CBK data shows that with every passing year, Kenyans are withdrawing more and more of the low-value coins from circulation with the value rising from Sh733 million in 2016 and gradually rising to Sh858 million for the Sh1 coin as of June 2020.

Currency in circulation increased by Sh8.2 billion in the FY 2019/20, an increase of 3.3 percent.

CBK reports that it spent Sh3.047 billion on the production of currency in circulation in 2020, an addition of Sh833 million compared to the Sh2.14 billion spent in 2019.

"The expenses include printing, minting, freight, insurance and handling costs," CBK states in its annual report.

With a fast expanding digital cash space, the relevance of coins in the economy is certain to dim further.

Data by the CBK shows that mobile payments through agents were recorded at Sh590.36 billion in January, a 58.7 per cent increase from Sh371.9 billion recorded in January 2020.

The use of mobile money has grown sharply since March last year when incentives such as removal of mobile-bank account transfer fees and charges on transactions below Sh1,000 were introduced in a bid to discourage the use of hard cash that was said to spread Covid-19 through contact.

The Central Bank also doubled the daily transaction limits to Sh140,000 and increased the amount that can be held in a mobile wallet to Sh300,000, allowing for larger ticket transactions to go mobile.

More Kenyans have also adopted merchant payment options available on mobile wallets. They are also using the platform to make utility payments, avoiding the need to go queue in banking halls to deposit money in utility services providers' accounts.

This saw an increase in money transacted on mobile phones to Sh5.21 trillion last year, compared to Sh4.34 trillion in the previous year.

The waiver on fees for transactions below Sh1,000 was however ended in January.