The M-PESA is revolutionising money transfer in Kenya. Branchless banking is a success across the African continent, but the growth of Kenya's mobile money service is astonishing.
Since launching in March 2007, the M-PESA has attracted over five million registered users, and this number is growing fast, with more than 10 000 new users being registered every day. By the middle of last year, over 18 billion Kenyan Shillings (approximately R1.9 billion) had been moved through the system, via person-to-person transfers.
M-PESA allows users to send money over their mobile phone without the need for a bank account. Registered users are allocated a stored value account into which e-value is deposited and from where they can send money (a customer does not need to be a subscriber to receive cash). According to Safaricom, the combination of these factors makes M-PESA a world first.
Janet Paterson, ITWeb contributor
M-PESA is a Safaricom service that allows users to transfer money via a mobile phone, and Kenya is the first country to implement such a service. M-PESA is available to all Safaricom subscribers (Prepay and Postpay), even if they do not have a bank account. Registration is free and available at any M-PESA agent countrywide (there are over 5 000 agents across Kenya). The M-PESA application is installed on users' SIM cards and works on all brands of cellular handsets.
Olga Morawczynski, a PhD candidate at the University of Edinburgh, who has spent the best part of a year studying customer adoption and usage in Kenya, makes the following observations on reasons for the success of M-PESA: “Some of the work that I have been doing makes several arguments as to why M-PESA has become so popular. Firstly, it is the young, male, urban migrants who are driving the uptake of services... They are usually better educated and earn higher incomes than those in the village. Because these migrants are the senders, they can choose the channel for money transfer. They then influence recipients in the rural area - who are usually female, less educated and poorer - to use M-PESA. This latter segment is referred to as the 'technology laggards'. They are usually the last, and often the least likely, to adopt an innovation.”
Staying afloat
When it comes to barriers to even further adoption, cash float on the part of agents is an issue. Morawczynski explains: “Because the majority of transactions in the village are withdrawals, agents must maintain their cash float. They do this by making frequent trips to the bank. This can be problematic if the agent is not close to an urban centre, where most banks in Kenya are located.”
In February, Kenyan mobile operator Zain launched its mobile money transfer service Zap. Billed as more than a mobile money transfer service, Zap allows users to link directly into their bank accounts and pay bills. The Zap service is charged at a flat rate, whereas E-PESA's rates are on a sliding scale.
Janet Paterson, ITWeb contributor
Morawczynski continues: “Despite these cash float problems, the majority of customers in both the urban and rural areas assert that they prefer M-PESA over other money transfer services. This means that M-PESA must be offering them some kind of substantial benefit. In the village of Bukura, this benefit comes in the form of savings on transport. Customers do not need to travel into Kakamega, the nearest town, to access the service.”
While users of the service may be concerned about security, and the impact of their mobile phone being stolen, the real value of the phone lies in the sim card. With M-PESA suitable for all makes of handsets, users treat the security issue in the same way as they might look after their cash.
Andrew Limo, a media consultant from Kenya, said with sim cards now elevated to a form of currency, it is common for Kenyans, when travelling around the country, to remove their sim card from their mobile phone and store it in their pocket, “or sock”, and then simply pop the sim into another handset to access their funds at a later date.
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