Mobile money transfer services have increased daily per capita consumption levels of many poor homes from survival level of less than Sh125 a day.
Women-headed households have especially benefited from this notably by being able to even use the money to do business.
One factor responsible for the fast mobile money growth is the more relaxed operating conditions as compared to commercial banks, but therein lies the risks such as loss in state revenue and deposits should the system collapse.
The increased use of mobile money services has lifted two per cent of Kenyan households from extreme poverty in the past nine years, according to a new study conducted by Massachusetts Institute of Technology scholars.
Investigating the financial and social impacts of mobile money transfer services on Kenyans since 2008, economists Taveet Suri and William Jack say that the services have increased daily per capita consumption levels of many poor homes from survival level of less than Sh125 ($1.25) a day.
Women-headed households have especially benefited from this notably by being able to even use the money to do business.
This has been made possible through improved financial management in terms of savings, and formation of more diverse risk-sharing networks, which have made them more financially resilient and able to protect themselves against economic shocks.
Underlying this cut in the poverty rate is the fact that money can change hands faster, with minimal inconvenience and at lower expenses than was the case previously.
Gone are the days when it was necessary either to travel physically to a location to give someone cash that they needed just to purchase something urgently or they had to use unreliable carriers in the form of public transport vehicles or other people.
Not to forget that most Kenyans still do not have bank accounts into which cash can be transferred.
“Mobile money has been adopted by the vast majority of Kenyan households. We estimate that access to the Kenyan mobile money system M-Pesa increased per capita consumption levels and lifted 194,000 households, or two per cent of Kenyan households, out of poverty,” the economists said.
They went further to note that the impact was even bigger for female-headed households.
“The impacts, which are more pronounced for female-headed households, appear to be driven by changes in financial behaviour—in particular, increased financial resilience and saving—and labour market outcomes, such as occupational choice, especially for women, who moved out of agriculture and into business. Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labour, resulting in a meaningful reduction of poverty in Kenya,” the scholars noted.
Mobile money began in Kenya in 2007 with the aim of enabling citizens to send money while being charged a transaction fee.
The value of money transacted through mobile payment from January 2017 to July stood at Sh2.1 trillion, representing a rise of 12.5 per cent from last year’s Sh1.8 trillion transacted over the same period last year.
In the financial year 2017, Safaricom’s #ticker:SCOM M-Pesa generated Sh55 billion revenue, which represents nearly 27 per cent of its total revenue in the financial year.
With more and more innovative mobile money products such as channels for paying utility bills, buying goods and services, investment in bonds through M-Akiba being launched by service providers its fair to say this has been made possible with over 85 per cent mobile network coverage in the country.
With a GDP of Sh7.15 trillion, the value of payments made through mobile money platforms from August 2016 to July 2017 stands Sh3.6 trillion, almost 50 per cent of the GDP.
However while mobile money transfer in Kenya has seen widespread adoption through time, the value of monetary transactions made through electronic cards have been stagnant at Sh115 billion monthly for the last four months.
This has been attributed to the higher levels in number of mobile money transactions (153 million) as compared to 17.9 million transactions made by electronic cards.
The Banking Supervision Department report, recently released by the Central Bank of Kenya, indicates a 2.3 per cent reduction in the total number of ATMs from 2,718 as at end of 2015 to 2,656 as at end of 2016.
The banking sector regulator attributed the reduction to adoption of cost effective financial services such as those offered by mobile banking service platforms.
However in a bid to put up a fight banks have opened up more branches this year. So far 38 new branches have been opened as compared to 20 that have been closed, with this being attributed to the increase in number of ATMs as at the end of July, 2017 to 2,782, a 4.7 per cent rise as compared to the 2656 ATMs at the end 2016.
Mobile money growth is high in sub-Saharan Africa. With such a huge dominance of mobile money systems in the money market, introduction of measures such as restriction of value of transaction and daily limits of transaction to be done has ensured security of the system and lowered the risk.
There are however questions on the correct regulatory structure due to the multiplicity of institutions involved in its development including those of communications and the central banking.
National Treasury officials have termed mobile money transfer as a “plausible financial risk”, noting that the loose regulatory structure has facilitated the development and success of the system. That notwithstanding, it still remains a huge gamble because of the inherent risk of what would happen if the services were to collapse.
One factor responsible for the fast mobile money growth is the more relaxed operating conditions as compared to commercial banks, but therein lies the risks such as loss in state revenue and deposits should the system collapse.
In one executive programme at the Kennedy School of Government in the US in 2015, discussants held two differing positions on the issue of regulation: to liberally allow innovation and the other do tight control of it.
“|The discussants positions were”) a laissez-faire approach where you allow innovation to happen until it reaches significant scale and may become relevant to systemic risk or a much tighter regulation citing the fiduciary responsibility these actors have when handling, in one way or another, the money of the poor.
There was no clear consensus on either but M-Pesa would not have prospered in a tighter regulatory environment.
This may in part explain why, with 200 – 250 launches of mobile money each year around the globe only some 30 schemes have reached more than one million clients,” one blog on fintech reports on the discussion.
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