Mobile Money Implementation in Kenya

8/13/2019 Mobile Money Implementation in Kenya

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John Stabile

11/13/2013

International Development in Practice

Organizations’ Lessons from Mobile Payment Technology in Kenya

In terms of mobile payment technology usage in developing nations, Kenya is far ahead of

its competition. M-Pesa and newer competitors have drastically changed the way money is used

in the country, and there are no signs present of this technology only being a fad. Businesses and

other organizations have jumped at the opportunity to adopt this service into their everyday

business practices to take advantage of the ease and efficiency that it provides. For this reason, it

Kenya is a logical location to study in order to provide BRAC with case studies and information

regarding what they could expect and be weary of when trying to implement this service to enhance

their operations. Loretta Michaels is the field expert in this area, having written two reports

distributed by USAID on the subject that are of impeccable importance to learning in this area.

In Kenya Case Studies in E-Payment, Michaels demonstrates the benefits that four separate

and different organizations have found using this technology. Beyond the general public, “Kenyan

microfinance institutions (MFI) and insurance companies are increasingly using M‐Pesa for cash

disbursement and repayment; businesses, government and NGOs are using it for cash transfers,

procurement and salary payments” (7). The Kenyan Ministry of Lands found that it was able to

cut corruption, increase its ability to enforce payments, making payments easier and more

convenient for constituents, doubled the amount of payments coming in, and reduced paperwork

(11-12). PACT Kenya before would have an employee go out into the field and disperse money


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for all of the workshops they would run, taking approximately three days and risking losing the

money as they carried it around, but after starting to use M-Pesa they were able to cut down their

costs for this activity from Ks 46,500 to only 3,750 (12). The Kenya National Examinations

Council before would have to send payments to proctors and other staff by vehicles during the

rainy season when many roads would be impassable, thus requiring an airplane and insurance on

the cash to finish the delivery. Costs were cut by more than 86%, as well as dramatically

expediting the time it took for staff to receive their payments (13-15). Lastly, Juhudi Kilimo is a

microfinance organization working exclusively with extremely rural farmers, before requiring its

clients to travel long distances to receive and repay their loans via checks at a bank. While clients

will have to pay slightly more money to repay their loans, both the organization and clients will

save large amounts of money by paying through their cell phones, while Juhudi also is now

experiencing greater efficiency in their record keeping as well (16-17). Clearly, much success can

be found and operations improved through using mobile payment technology.

In order to obtain a more holistic picture, however, one needs to move to the other report,

Better Than Cash: Kenya Mobile Money Market Assessment. Most of the cost savings stem from

being in remote areas far removed from banks, where all the alternatives to delivering money are

particularly cost prohibitive, such as hiring an armored car for this purpose. The most cost savings

were found where they could be widely used by as many people as possible to achieve the “network

effect,” and not simply testing a few transactions. Many microfinance institutions saw the amount

of repayments decrease as loan officers were no longer physically present with them as often (39)

and felt the fees associated with their transactions were excessive, as they were designed for

remittances and not small repayments, although both Safaricom in Kenya and Roshan in


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Afghanistan have begun to offer separate fees for microfinance (40), especially as competition

continues to increase amongst the service providers.

Also, there are more technical issues and obstacles to overcome when using this technology

for the first time. For example, M-Pesa was not the simplest way to distribute money, as an

organization needs to set up accounts and integrate their payment platforms with the system. In

some rural areas, cell phone service is not present or people will not own cell phones, and so those

living under these conditions cannot be reached. A national ID is required to open an account, and

as extends their reach to more remote locations where government services are less frequent, this

may become less common as well, creating more issues if you are trying to reach everyone under

one method. While the mobile payment systems would provide electronic records of the payments

to the organizations, many still would have preferred to have a direct signature from the receiving

party in case of any disputes or audits from their donors. Some organizations did not at first utilize

the bulk payment options, and thus were flagged for suspicious activity for all of the transactions

they were trying to complete.

Many of these hurdles may have already be overcome as society continues to change. Cell

phone service and usage will most likely continue to spread, while Safaricom who operates M-

Pesa will continue to improve its service based on its customer needs, and some growing pains

will always be present when adapting to a new form of doing something. Perhaps most

importantly, “despite the many challenges faced when implementing mobile money, when asked

what they would do differently, all the partners and organizations interviewed stated that they

would have started using mobile money sooner than they did, and wished they had known more

about its uses and benefits” (37). Many of the organizations also cited other ways they planned to


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implement the technology in the future that they have not yet started, again demonstrating the

learning curve with this new technology and implying the best may still be to come.

Organizations are demonstrating that mobile payment has helped them to discover, “a

number of benefits, including reduction of cash ‘leakage’ and corruption; increased operating

efficiencies, including less paperwork; better transparency and accountability via the electronic

records, and more independence and self-sufficiency for users. In terms of quantitative measures,

organizational users of mobile money are reporting reduced cost of cash disbursement … such as

cost of cash handling and associated security, reduced staff costs and better utilization of staff”

(Better Than Cash, 31). When these benefits are reached, any organization will have saved enough

resources to better accomplish their own mission without any more strain on outside support in the

form of grants or donors. These results, however, should be taken with a grain of salt, as similar

to M-Pesa’s incredible success as a form of mobile money, this is also one of the only places where

we can find such indisputable success when organizations implement this into their everyday

business practices. The struggle will be taking the great successes founded in Kenya, and finding

ways to apply them to a separate environment in Bangladesh which can look quite different in

terms of access to digital payments.


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Appendix A

(Fighting Poverty Profitably)


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Works Cited

Bill & Melinda Gates Foundation. Fighting Poverty Profitably. Rep. Better Than Cash Initiative,

Sept. 2013. Web. 12 Nov. 2013.

Michaels, Loretta. Better Than Cash: Kenya Mobile Money Market Assessment . Rep. Ed.

Accenture Development Partners. Comp. USAID. NetHope, Nov. 2011. Web. 12 Nov.

2013.

Michaels, Loretta. Kenya Case Studies in E-Payment . Rep. Ed. Accenture Development

Partners. Comp. USAID. Better Than Cash Initiative, Nov. 2011. Web. 12 Nov. 2013.

Documents

Mobile Money Implementation in Kenya