Peso Coins: Seigniorage, shortages, and what’s to come

Since the time I’ve written on this site, there have been several articles written about coin shortages in the Philippines. Indeed, it can be frustrating at times to need to buy something and the shop or vendor does not have any change, particularly if you’ve just visited an ATM. Is there truly a shortage of coins?

According to the BSP, there are currently over 16.3 billion Peso (Piso, Sentimo, tag.) coins in circulation, equivalent to 171 coins per person, if distributed equally. Compare this to The Philippines’ ASEAN neighbors, which average a per capita 50 coins per person in circulation. In other words, in the Philippines, there are nearly three times as many coins in circulation as in neighboring countries. (As a bit of trivia, if ALL Pesos in existence (coins and bills) were to be distributed to the population equally, each person would have P7,944 in bills and P202 in coins… The average Peso banknote value is P253 and average coin value is P1.16… The more you know!!!).

Philippine Coins

Philippine Coins

Why the difference? Several reasons.

The word Peso is Spanish, meaning “weight”. When coins were made with metals of intrinsic value, such as gold or silver, the weight of the coin determined its’ value. However, there is a problem with making coins from metal using this method. What if the value of the metal exceeds the value stated on the face of the coin? The term for this differential is seigniorage: The coin costs more to manufacture than it is worth at face value. The intrinsic metal value exceeds what the face of the coin says it should. In the old days, it was not uncommon to file away or clip away parts of coins to either adjust their value to the metal value or to make “change” (or to shortchange unwary individuals or merchants). Hence, the term “Piece of Eight” for the old Spanish coins. The 8 Reales coin was often clipped into smaller pieces to adjust its’ value. (This also gave rise to the term “bits” in the United States, as in “Shave and a haircut, two bits”. The early American colonies used both the Spanish 8 Reales coin and the Austrian Thaler (Dollar), roughly equivalent in value, as their circulating coinage.) Of course, very few countries use gold or silver any more for their coins, except for bullion or commemorative coins for collectors, and the Philippines is no exception.

The first coins issues specifically for the Philippines were in 1861, by Spain, using Igorot gold. The first silver coins were issued in 1864. Prior to that, most circulating coins were Spanish gold or silver issued in the New World. Generally, the country or region where minted was not indicated. The coins generally had a portrait of the monarch on the obverse and the coat of arms on the reverse, along with the date.

All current coins in circulation in the Philippines are made from various alloys of copper, brass, nickel, aluminum, or steel. However, a quick glance at the commodity prices for these metals shows an interesting trend over the last decade or so: The prices have skyrocketed for these metals (especially copper), in addition to the prices for gold and silver (A problem not faced by currency, which is just paper and ink). This has led to a problem: Since the intrinsic value of the metal in the coins now exceeds their face value (P1 and less), the BSP has caught people melting the coins and shipping the ingots overseas. (This problem is not, by the way, unique to the Philippines… In the United States, there are shortages of pennies and nickels, both of which cost nearly twice their face value to manufacture, largely due to seigniorage.)

So, since there are entrepreneurs reading this article that may get ideas about getting rich, I have the following to state: DON’T DO IT! Defacing Philippine currency, including coins, is highly illegal, and the BSP pursues those doing so. The reason is simple: It costs the government a substantial amount of money to replace the coins removed from circulation. In part, this is also one of the reasons there are controls on the export of pesos (Coins, rather than bills). The BSP has not released the actual cost of manufacture for each denomination, not wanting to encourage hoarding, but they have admited that seigniorage is a big problem.

Another reason of the shortages of coins is the lack of value in the smaller denominations, due to inflation, especially those values under 1 Peso. At an exchange rate of P1 = US$0.02 (roughly), the 25 Sentimo coin is worth less than 1/2 of a cent, which does not buy much anymore. Of the 16 billion coins in circulation, nearly 7 billion are the small denominations. Current circulation, according to the BSP, is largely among charities. In fact, the BSP is trying to remove these coins from circulation by encouraging banks and supermarkets to collect and donate the small coins, being reimbursed, in kind, by the BSP via check. In 2009, nearly P400,000 was collected in 1 and 5 Sentimo coins to build housing for the poor (Seven dormitories in the Cordillera). Small denomination coins (P1 and less) are legal tender only up to P100. P5 and P10 coins are only legal tender up to P1,000. Therefore, the BSP aiding charities in this manner helps re-distribute the coins into circulation.

Finally, the BSP believes that many P1 coins are removed from circulation by the increased number of amusement machines (like video games) in the country. These coins tend to stay within the place of business rather than being put into general circulation.

The small denomination coins, under one Peso, are currently being gradually demonetized by the BSP. New coins and designs are being released in 2013, and one Peso will become the smallest denomination on the new coins. Why issue new designs? Well, in a word, counterfeiting. The BSP has caught numerous people counterfeiting the P5 and P10 coins. Since coins last much longer than bills, counterfeit coinage stays in circulation for a far longer period of time. Therefore, by changing the designs periodically, counterfeiters are forced to adapt and change. You can also bet that the metal contents in the alloys used will be changing in order to reduce the impact of seigniorage. The new coin designs have not yet been released to the public, but the BSP has stated that they will feature national symbols that are representative of the country.

So, some details about the currently circulating Philippine coinage:

 

 

 

 

 

1 Sentimo: Copper plated steel

15.5 mm dia., 2.0 g.

 

 

 

 

 

5 Sentimo: Copper plated steel

15.5 mm dia, 1.9 g.

The only current Philippine coinage with a center hole, it is often used for crafting native jewelery. This use is discouraged by the BSP, though it is not illegal as long as the coin itself is not defaced.

 

 

 

 

 

10 Sentimo: Copper plated steel

17 mm dia., 2.5 g.

 

 

 

 

 

25 Sentimo: Brass (Brass plated steel after 2004)

20mm dia., 3.8 g.

 

 

 

 

 

1 Piso: Cupro-Nickel (Nickel plated steel after 2004)

24mm dia., 5.53 g.

 

 

 

 

 

5 Piso: 70% copper, 5.5% Nickel, 24.5% Zinc

27 mm dia., 7.7 g.

 

 

 

 

 

10 Piso: Ring, Cupro-Nickel. Center Alumino-Bronze.

26.5 mm dia., 8.7 g.

When the P10 coins were first issued in 2000, rumors started circulating that the bronze center contained gold in the alloy. The BSP was alerted that many of the centers were being removed and sold to unsuspecting people as gold. Of course, this rumor makes no sense, however it illustrates the type of publicity that often surrounds new currency issuance. Another example is that many of the  ”errors” discovered in the new bills issued in 2010 were resulting from limitations in the printing process and the bills’ security features, rather than actual errors. Nevertheless, the BSP received some negative publicity from the issuance. Finally, the dual alloy nature of the P10 coin has led to its’ use in the manufacture of native jewelery, removing a fair number of coins from circulation.

Post Author: JohnM (207 Posts)

John Miele is a Citizen of the World, having spent time in many locations around the globe. Currently, he finds himself in Manila, but travels throughout the Philippines. John joined the Live in the Philippines Web Magazine in mid-2008.


Comments

    • Tom Ramberg says

      We stop by the gas station to get change for our hardware store. The tricycle and jeepney drivers usually pay with coins.

      • John Miele says

        Tom: That’s a good idea, too. Honestly, where I usually see the “no change” issue is 90% of the time in the province.

  1. says

    John, I admire your writing. Current and previous writings contains so much weight and value! You’re one dude filled with history and what not.

    Whilst I was in the provinces – well they are cities, but I don’t call them that—of Surigao, Tagum, and Kidapawan (sorry, Bob, Ecoland was the only place we set foot to, in Davao), these coins were of value to us. We always kept them because we needed them for fare. 8 pesos each ride, and sometimes a double ride to those tricycle operators who thought they could get away with it – but thanks to my wife, they had another thing coming (she could be really nasty!)

    In Manila, though, I found them more to be of pain. I really had no use for them. In less than a day, I have accumulated so much of it. The day before I flew back home (Australia). Myself and my cousin were waiting on a taxi and some dude… got us a taxi (we all knew he wanted a kick back for getting us a ride). So I emptied my pocket and gave it all to him — apparently the money was more than enough to buy him couple of kilos of rice—whilst he really only asked for some spare change for a cigarette.

    • JohnM says

      Jojie: I agree about the provinces… I tend to need far more coins (Especially around Christmas time). Here in Manila, I tend to use up coins at the sari sari and on the jeepney most often. The really small ones under 1 Peso, some merchants even refuse to accept those.

      If I remember right, in Australia the smallest note is now $5… I tend to accumulate a lot of coins when I am there, since I am so used to using bills and almost instinctively reach for bills first. I experience the same in other places that have eliminated smaller notes (Canada, UK, Euro). There are proposals in the States to eliminate the $1 and $5 notes, replacing them with coins (since coins last so much longer.)

      Here, one thing I wish that existed is a larger denomination note… If you have a major purchase, carrying around a large roll of bills is not something I enjoy doing. Same thing in Korea, where the largest bill is W10,000 (about US$10)

  2. says

    Hi John

    I’m sure there are plenty of jars hanging around in kitchens and bedrooms all over the country containing small coinage where they are being saved for a rainy day.

    There was a joke told about a farmer in Ireland who brought a milkchurn (remember the old milkchurns which were about 1mt in height) to the bank full of small coins which he had collected over many years and wanted them changed into pound notes. Well the bank took 5 days to count the coins (yes I know they weigh them and not count them) which amounted to 4,362 pounds. When the farmer was told this he apologised profusely because he said he brought them the wrong milkchurn, his milkchurn should have contained 4,575 pounds, so the churn he brought them was his wife’s one, so he will call back again tomorrow with the proper milkchurn.

    Jack

    • John Miele says

      Jack: We have a jar, too, keeping the coins mainly for small purchases near home (like from the taho guy). I’ll also sometimes throw some coins into Juanito’s piggy bank from time to time.

  3. says

    jack says: November 15, 2011 at 1:40 pm
    I’m sure there are plenty of jars hanging around in kitchens and bedrooms all over the country containing small coinage where they are being saved for a rainy day.

    We actually did that one time here in Oz. Over a span of one year, we placed all our gold coins (they are $1 and $2) and opened it up just after new year and straight to the bank. We collected 4k!

    John, yes, the smallest note (and litterally too) is $5. When I am brave enough, I will take jeepney rides. But for now, taxis or buses. Jeepnes are simply too confusing for me.

    • John Miele says

      Jojie: The jeepneys are easy once you’ve been here a while. I tend to favor taxis, but will take a jeepney from time to time.

  4. says

    Hi John – Interesting subject in so much I’d hazard a guess that most household’s world wide let alone the Philippines has a container of some description where loose change is hoarded. In fact just the other day I found a container in our house in the UK long forgotten about containing almost £30.00 in small coinage. Not a fortune granted but heavy enough to notice if it were in ones pocket.
    Further to this I was thinking if there is a certain time of the year when this hoarded amount may find its self back into circulation such as Christmas present buying or giving to charity in the event of a disaster.
    Incidentally we also have a Paul Masson empty wine container half full of small coins back in the Philippines, so we are just as guilty as anyone else in hoarding coins.
    I can remember taking a load of hoarded coins to our local Supermarket one time where they had a change counting machine however they charged 5% to convert it into notes, not a bad business.
    At my age I have now decided to spend and enjoy all monies in my possession just in case I don’t get the opportunity to spend any I may hoard.
    Regards.
    Jim.

    • John Miele says

      Jim: I agree that may be the case. When I lived in California with my ex-wife, we would save up the change and go every 6 months or so to the coin counting machines. However, in many of the apartments I have lived in, quarters were about equivalent to gold on laundry day… nothing like trying to do your laundry and getting caught short of change.

  5. Bob New York says

    I always seem to acumilate a lot of coins as in dealing with a foreign currency. It is easier and quicker to just use paper currency. After a while though I feel I have to start getting rid of some of it. In some of my visits to the UK, I ended up with a coat pocket full of coins that must have been the size of a softball. I bought some things in a supermarket and when I got to ” the Til ” I pulled out a big handful of coins and said to the cashier ” take it out of here if there is enough “. That reduced the bulge in my coat pocket substantially !

    Dealing with Philippine coins I didn’t have too much of a problem with and a few times while buying a take out coffee in a fast food franchise I’d pay for it with the coins. Sometimes they would ask ” Sir do you have 4 peso ? ” or what ever the odd amount was. After each visit, I still seem to have a quantity of them in my carry on bag for the return home, maybe I’ll make use of them on the next visit.

    Just like most of the rest of us, I also have containers of coins in different parts of the house. Just small stuff and mostly pennies. Every few years when I get tired of looking at them I’ll roll them and take them to the bank. Sometimes I need the space more than the coins.

    • John Miele says

      Bob: Samer with me on the foreign coins… Last trip to Hong Kong, Rebecca found about HK$500 in coins that I took with me to spend (When you change currency, they usually don’t take coins at some of the outlets in airports exceptt to round up to the next size bill)

  6. queeniebee says

    Hi John, It’s true that there always seems to be plenty of coins in the province. Coins are a precious commodity that changes hands every day. More difficult is to change a 500 or 1000 peso note.
    With Christmas coming, a lot of change will be given out to Christmas carolers.

    • John Miele says

      Queenie: Last year before Christmas, I got a bunch of rolls of 10 peso coins for the carolers from the bank before we left.

  7. Katrina says

    I think the Phil government should face out 1,5 and 10 centavos since they are really of no use and just forward minting the more commonly used coins…because really getting 1,5 and 10 centavos is a pain in the ass because there are no 25 cents available..

  8. Paul Thompson says

    John;
    A large amount of the missing coinage is at the bottom of my wife’s many purses, she move her wallet and cell phone but the coins stay at the bottom of the last one she used. She can’t be the only one doing this.

  9. Wonderwall says

    John,

    Interesting article. I’m an American currently living in Winnipeg, Canada. This past summer, we visited the Canadian Mint (CM) for a tour and noticed that the Filipino flag was one of many of the different country flags flying out front of the
    CM. The CM apparently coins money for many countries around the world. The lady giving the tour brought up the same point you are making about the cost of minting some coins. The Canadian 1 cent apparently now costs about 1.5 cents to Mint. She said that every year the politicians in Ottawa discuss the idea of not producing them anymore, but that no legistlation has been past as of now.

    WW

    • John Miele says

      Wonderwall: That’s actually a pretty common problem in many countries. For how many years has the US Mint tried to eliminate the dollar bill, but people still resist due to the symbolism and despite the quite obvious cost benefits.

      As to mint locations, many countries have their coinage minted in other places. Modern coin minting takes specialized equipment and even more specialized talent to produce to modern standards.

  10. Wonderwall says

    Bob,

    Great site BTW. I recently found out some interesting trivia related to Filipino money that may be of interest to some of your readers. This past summer we attended a pretty cool annual festival in Winnipeg known at Folklarama. You can Google it if you want additional info. Anyways, over the course of the 2 week festival, there were 2 different Filipino pavilions represented (in addition to dozens of other cultures as well). One of the individuals there is a writer for a local paper called the Pilipino Express (http://www.pilipino-express.com/history-a-culture/in-other-words.html). He is apparently very knowledgeable about the ancient Filipino scripts (http://www.mts.net/~pmorrow/bayeng1.htm). After talking with him about the ancient alphabet, he told us that he had himself created a new font for the ancient alphabet and that somehow his particular font was chosen to be featured on the new Filipino paper money. If true, that’s pretty crazy.

    WW

    • John Miele says

      Believe it or not, font creation is most definitely a skill. In the case of Baybayin, each character needs to be designed and combined into a working package. There are many free fonts available for download, but the good ones nearly always require sometimes costly payment, due to the skill needed to create them (especially if they are to be used for something like printing money, where the resolution must be exact, due to the necessary transferrance to dies). This is actually part of the reason that some of the “errors” on the new bills existed… Some were intentional as security, but others truly were limitations in the printing process.

      • Wonderwall says

        Interesting. I’d never really thought about fonts too much prior to a couple of years ago when one of my friends was telling me about a documentary called Helvetica (by the font of the same name). It’s hard to believe that fonts are so important. Not being in advertisement, I had never really given it too much consideration.

  11. alf says

    Hi John! I’m impressed with your knowledge of current Philippine coins. Being away from there, that has kept me updated, :-) It is interesting to note also your information regarding the parting of Spanish coins (as a some sort of change or sukli in Filipino). Although I had one money and banking subject in college, I did not know about this historical bit until now. I like the Philippine coins we had when I was little, it has more face value and a lot more intrinsic value. Speaking of Philippine coin, I happen to bring some coming back to the UAE. You know how similar the size of a dirham to a Piso. I mixed it up with my dirhams when giving my fare to the taxi driver. The taxi driver was attentive and immediately gave back my Piso. Shame! :-) It is a good article and a nice read! :-)

    • John Miele says

      Alf: Actually, there was quite a scanday in the UAE over that… Some vending machines were emptied using nothing but Pesos. The UAE gov’t got really angry about it, and people were warned not to try it. I think they re-calibrated the machines since then. Given the number of OFWs in the UAE, word of the similarity and the crackdown was discovered pretty quickly.

      The similarity in size weight to the US Quarter has also caused problems in some US states, especially at highway toll booths.

  12. Bruce Michels says

    John,
    I’ts been along time since I was back in the Philippines (20 yrs) I remember when a peso was worth something. As I read your article I get the feeling that inflation has also caught up with Philippines as well. I guess coins or pretty much an incovience. why don’t they just round the price up or down to fit the bill?

    • John Miele says

      Bruce: Many merchants do just that. I haven’t seen the “need a penny, take a penny” – type cups here, but I have had merchants leave off a peso or two if I was caught short and just had large bills.

  13. says

    Hi guys! Just want to share my insight on these errors. Early on, I was one of those who criticize our money for its errors. But a friend of mine once said, “Its not a science book, to be so accurate with those scientific names. Its not a map, to be so precise to have 7107 islands. Its not a photograph to be so accurate down to the very smallest color detail. These are very different things. Remember its a paper money.” Then I smiled and realized his point.

    ——————
    http://www.facebook.com/PinoyNumismatistNetwork

    • JohnM says

      PinoyNumnet:

      Given your web site, I defer to your far greater knowledge on the subject. I really can understand why some Filipinos got upset: We are talking national symbols, after all. However, your friend is correct in that it is, after all, only paper.

      The Philippines has a fascinating history of coins and money. I really encourage those who are interested to take a look at your link: Tons of far more-detailed information in there!

      • says

        Why thank you! I really appreciate that!

        True.. Philippines really has a very fascinating history of coins and money. There so much history a single coin can tell. By the way you have a very healthy site here and I really love this article on peso coins, its very informative and I know other readers will love it too. Thanks again and more power!

  14. Kathleen Reynolds says

    I have quite a few coins from the Phillipines that I am looking to get rid of, can you tell me where I can exchange them so they can be put back into circulation in the Phillipines? I live in Houston, TX
    Thank you

    • John Miele says

      Kathleen: Best way is either to send them to family in the Philippines or talk to a coin dealer. Exchange houses usually don’t handle coins. If they are collector coins, I suggest contacting the Pinoy Numismatic Network (listed in comments above) and asking them.

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