For many rural small traders, the one shilling coin no longer counts

Money Markets

A wholesaler, Justus Omollo of Joiba Enterprises counts coins in Luanda market. PHOTO | TOM OTIENO 

By SILAS APOLLO, sapollo@ke.nationmedia.com

In Summary

• It is becoming common for shopkeepers to reject the coins, alleging that it is no longer a legal tender.

Fanuel Omung’ala has been stocking one shilling coins in his house for the past six months.

Mr Omung’ala, a pastor in Luanda in Western Kenya, says he has decided to keep the pennies because no shopkeeper accepts them. He says six months ago , a storekeeper turned him away when he went to buy bread and a packet of milk.

‘‘The shopkeeper refused to pick up the coins, and that is all I had. I pleaded with her to take the money but she said it was not valuable any more,” he said.

‘‘I tried a number of times to use the coins to buy food but no trader could accept them,’’ he says.

He now collects the pennies in a plastic container in his house and occasionally takes them to the bank in exchange for notes. He sometimes oils them to ensure they do not rust. One day, he hopes to use them.

The father of two is not alone. In Kisumu, Odhiambo Aliwa, a 28-year-old lecturer, has been keeping coins in his office drawer for the past one year. He says most local shop reject them.

He says he went to vendor to buy water with coins and was turned away. “There is a time I went to a shop in Maseno town to buy water. I had a Sh10 and Sh15 in one shilling coins. The shopkeeper refused to sell to me the water,” he said.

The story is the same in most parts of western Kenya where the one shilling currency no longer trades.

Shopkeepers in Homa Bay, Kakamega, Migori, Vihiga, Kisii and some rural areas in Kisumu do not accept coins, arguing that they are bulky and losing value.

The one shilling coin weighs approximately 5.50 grammes, according to estimates by the Central Bank and it is made of nickel-plated steel. The Sh5 and Sh10 coin weigh 3.75 and five grammes respectively. 

Hasman Onyango, a trader in Rongo, Migori, says they have been forced to increase the prices of goods that were not in the denomination of Sh5, Sh10 and Sh20 to make it easier to trade. “The one shilling coin is no longer accepted in most shops in the area. Even wholesalers reject them ,” he says.

Mr Onyango says traders used to take the coins to those running photocopy business. ‘‘But they also stopped accepting them ,” he says.

Some shopkeepers have however found a way around this problem. For instance, a matchbox that would normally cost Sh3 now trades at Sh5 for two, an egg that costs Sh12 now sells at Sh25 for two.

Other affected commodities are sweets, salt which now retails at Sh15 instead of Sh12 and candles at Sh15 instead of Sh11.

But the shopkeepers’ refusal to take coins kills a cycle that the Central Bank of Kenya (CBK) relies on to keep the low denominations in circulation.

As at December, 2014, there were coins worth Sh6.6 billion in circulation which CBK believes are sufficient to support transactions in the country. There were 693 million one shilling coins in the market in December and 274 million fifty cent coins

“It is a violation of the law to deny customers the possibility of obtaining their change in Kenya currency or deny them the opportunity to agree to settle the transaction in any other form,” said CBK in a statement.

It added that any member of the public experiencing difficulty in using coins as a means of exchange or in depositing them with commercial banks should report to a CBK currency centre for assistance.

READ: Supermarkets warned over issuing sweets for change

But consumers like Mr Omung’ala do not know of any currency centre in their neighbourhood. It is easier to pay extra for goods.

For photocopying services, customers are either charged Sh5 for every photocopied page instead of Sh3. Alternatively, one can have a page photocopied twice at Sh5 to supplement the charges. 

Hussein Adballah, a trader in Migori town says: “For some reason, some wholesalers have now resolved to charge a percentage if we give them too much pennies. We now start counting from the five shilling coin.’’

Depositing of coins with commercial banks has also been made difficult by the tellers while some banks charge a commission for coin- processing.

KCB charges 50 cents for changing over 100 coins in whichever denomination. The first 100 pieces of coins do not attract any charge, but from coin 101, it attracts a 50 cent fee for every coin despite the denomination.

For most banks, performance of tellers is also reportedly pegged on the number of transactions they do in a day so they tend to avoid counting coins which take a long time.

Accounting for the cash at the end of the day while reconciling the books is also tiring and time-consuming for the tellers. As a result people depositing coins are tossed from one counter to another.

The rejection of one shilling coins in the rural areas has now cast doubt on this legal tender, with fear that its poor circulation could affect the economy. This is besides the fact that the shilling is trading poorly against the dollar.

For instance, in 2012, poor circulation of the one shilling currency was blamed for the increase in commodity prices.

The trend, blamed on Kenyans hoarding pennies instead of allowing circulation was caused by huge losses in retail outlets in the search for low-denomination pieces, a cost that was then passed on to consumers in the form of higher cost of goods.

Supermarkets were forced to pay up to Sh60 for every Sh1,000 worth of coins due to the shortage.