Effect of Small Denominations of Kenyan Currency on the Economy

International Journal of Research and Scientific Innovation (IJRSI) | Volume VII, Issue IX, September 2020 | ISSN 2321–2705

Effect of Small Denominations of Kenyan Currency on the Economy

Nyanamba, Steve Ondieki
Kisii University

Abstract: For a long time, money has been used as a medium of exchange in most parts of the world. Most countries have developed their money in a currency which is distinct from that of the rest of the world. Most countries’ denominations range from small denominations to large denominations. The main objective of the study was to determine the effect of small denominations of the Kenya currency on the economy. The study used survey research design. The target population of the study was all the consumers, retailers and Supermarkets in Kisii County and Homabay County from which a sample of 225 was drawn from the two Counties under study. Data were collected through a structured questionnaire. Data were analyzed using descriptive and inferential statistics. The results were presented in tables and figures. The findings from the study revealed that majority (78%) of the supermarket shoppers own debit cards; 61% of the shoppers were not given the actual change as per the value purchases and that lack of small denominations of currency has led to purchase of goods not budgeted for; it has led to increase in prices of some goods and that lack of small denominations has led to selling of goods in bundles. The study recommended that the government should ensure continuous and adequate circulation of small denomination of currency for this will curb unnecessary increase of prices hence leading to inflation, besides controlling unnecessary purchase of goods not budgeted for.

I. INTRODUCTION

For a long time, money has been used as a medium of exchange in most parts of the world. Most countries have developed their money in a currency which is distinct from that of the rest of the world. Most countries’ denominations range from small denominations to large denominations. Amromin and Chakravorti (2009) define large denominations as those that are commonly dispensed by a country’s automated teller machines (ATMs) and small denominations as those which are less than those dispensed from ATMs. These denominations aid in payment of goods and services for cash. Cleland (2011) warned that, for cash to be convenient, and to function as an efficient means of exchange, a suitable denominational mix should be available to the public. The study protests that, although the public prefer smallest denomination to make payments, and to receive in change, most ATMs only dispense larger denominations of currency hence making it a bit difficult for lower denomination to enter into circulation.

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