This has seen retailers resort to giving customers sweets and matchboxes to make up for change in the absence of coins.
“The challenge is quite big as retailers. We’ve invested in pick-ups to go out and look for coins. It costs us approximately Sh260,000 a month just to get coins. Last year alone it cost us Sh3.6 million to get coins,” Willy Kimani, Naivas Business Development Manager said.
Small kiosks in the slum areas often have ample supply of coins and on average demand Sh50 for every Sh1,000 coins and at times Sh60 for every Sh1,000.
Most coins are in denominations of Sh10 and 20.
“Sometimes we have to go 200 kilometres away to rural areas to get coins for example from Murang’a and bring them back to Nairobi. It’s a heavy investment,” Kimani explained.
The situation in rural areas is no better with small kiosk owners privy to the fact that they can fetch an attractive price for their coins and hike the cost above face value.
Retailers have had to designate employees whose job is solely to look for coins, which sometimes can be a dangerous affair.
“Two of our employees were shot in a slum area, and were robbed of Sh130,000 which they went with to get coins, so this adds to the insecurity of our staff,” recounted Anil Dhingra Managing Director Ukwala Supermarkets Ltd.
So, in a bid to drive up circulation of coins in the market and curb a potential hoarding situation, the Central Bank of Kenya (CBK) launched a campaign dubbed “Chomoa Coins” that is urging Kenyans to surrender their loose change over the next week until December 7.
“The purpose of the coin week campaign is to encourage the public to exchange coins for notes, promote the habit of using coins in day to day basis but also encourage circulation,” CBK Governor Njuguna Ndung’u explained.
The CBK carried out a similar campaign in July last year which the governor hailed as a success, however momentum has since diminished.
Alfred Ng’ang’a, interim chair of the newly formed retailer umbrella body Retail Traders Association of Kenya (RETRAK), said prevailing customer trends have been the main reason behind the shortage of coins, since some find the currency cumbersome to carry around.
“Our single request to the Central Bank of Kenya is to also consider providing RETRAK members with a window to access currency coins directly or through specific commercial banks,” he appealed during the launch.
Members of RETRAK are testing solutions that will load low denomination balances on customers’ loyalty cards and related pre-paid credit cards.
Uchumi Supermarkets has already rolled out a ‘Change Card’ which shoppers can use to virtually hold change.
The introduction of coin vending machines is likely especially as the CBK makes a push to re-circulate coins into the market.
The CBK has issued over 1.31 billion pieces of coins holding an estimated face value of Sh5.1 billion.
Just last month the CBK released nine billion pieces and another 12 million pieces this month.
The bank has been reluctant to acknowledge that the market is facing a coin shortage, noting that this situation is not unique to Kenya with other countries such as Argentina having suffered a similar dilemma in 2009.
Buenos Aires experienced low circulation of coins that resulted in their overvaluation, creating a black market when hoarders would sell the coveted currency for seven percent of more above face value.
Banks were even subject to pay fines to the Central Bank if they failed to change bills to coins.
Consequently, supermarkets organised and began issuing bonds to their customers that were worth 10 percent more in value that the actual coins.
Governor Ndung’u said he hopes Kenya will not have to endure such a situation and will have the CBK look at several avenues to improve circulation of coins in the market to avoid launching another campaign.