A mobile money user withdraws cash from an M-Pesa agent in Nyeri town. PHOTO | JOSEPH KANYI
I have a little farm on the sweeping
eastern Laikipia plains that has me visiting at least once a month. The
singular cause of blinding migraines for the many telephone farmers is
fraud by farm workers. Those fellows will find a way to skim money, farm
inputs or farm outputs at any given opportunity and trust me, as soon
as you plug one leak they’re 10 steps ahead of you preparing for the
next scam. So one has to, as a telephone farmer, accept a certain level
of pilferage as part of the business-as-usual operations, or opting to
move and reside permanently in the farm.
Irritated and exhausted by one
certain input request, I set up a system that didn’t require the farm
worker’s intervention. I got a trustworthy boda boda (motor bike)
operator in Nanyuki (where trustworthy is a fairly fluid virtue) to be
purchasing the input on my behalf. But I don’t send him the cash. He
goes to the outlet, sends me the “Lipa Na M-Pesa” till number where I
pay and he takes the goods together with an electronic receipt to the
farm.
I specifically chose the outlet for those two
reasons: they have an M-Pesa till number and they issue electronic
receipts. I then pay him, using M-Pesa, for delivery of the goods and
have peace of mind, knowing full well that another scheme is likely
being hatched at the farm since I blocked what had been a lucrative cash
cow for the workers before.
Two things that are critical to the urban telephone farmer: a local bodaboda “guy” and M-Pesa.
While
I don’t have any data on the impact that bodabodas have had on the
transport economy – which must be undeniably high - more data on M-Pesa
is readily available. In the latest published Safaricom financials for
the half year ended September 30, 2016, the company had 26.6 million
registered customers out of which 24.8 million or 93 per cent were
M-Pesa customers.
However, a more accurate number is
yielded by looking at the 30-day active customers which registered as 23
million, with 17.6 million active M-Pesa customers or 76.5 per cent of
total active customers. Safaricom made more money from M-Pesa at Sh25.9
billion than it did from mobile data, which generated Sh13.4 billion.
M-Pesa revenue was equivalent to 43.3 per cent of the voice revenue data
of Sh45.7 billion. In simple words, mobile money is no bread and
butter; it’s the cream with a cherry on top!
Who were
these M-Pesa customers doing, you ask? Well telephone farmers like me
were a piddly fraction of the transaction volumes. Three quarters of the
Sh25.9 billion M-Pesa revenue was from what they call “bread and
butter” business, which are the person-to-person transfers and
withdrawals: John sends Mary Sh1,000, who promptly goes to an agent to
withdraw the same in cash and purchase food items for the house.
Telephone farmers like me are to be found in what Safaricom calls “new
business”, which accounts for 24 per cent of their M-Pesa revenue or
about Sh6.2 billion.
New business includes customer to business (individuals
paying for services using M-Pesa), business to customer (businesses
sending money to individuals, for example the Kenya Tea Development
Agency paying farmers their tea bonuses), Business to Business
(Distributors paying a manufacturer for goods delivered) and the rapidly
expanding Lipa Na M-Pesa that has saved many urban dwellers the pain of
having to send cash to purchase items via fundis (craftsmen), rogue
relatives and even more rogue workers.
But M-Pesa
revenue aside, it is the sheer transaction volumes that are simply eye
watering. By September 2016, it had transacted Sh3.2 trillion. Kenya’s
2015 Gross Domestic Product or GDP, according to World Bank figures is
$63.4 billion or Sh6.34 trillion. The M-Pesa volumes are virtually 50
per cent of Kenya’s GDP. However, hang on to your hat please as there is
some double counting in the M-Pesa transaction volumes since they
include deposits, withdrawals, person-to-person transfers and the
business volumes. The bigger question is whether M-Pesa then poses a
systemic risk in the event it is out of commission for whatever reason.
Firstly,
M-Pesa is a methodology of transferring cash virtually. The actual cash
sits in various M-Pesa trust accounts in Kenyan commercial banks. The
bigger concern is not whether one’s funds are safe if M-Pesa goes down,
it’s how to access a system that will release those funds, which are
sitting safely in a bank. Central Bank data from 2014 demonstrates that
while mobile money volumes are extremely high at 66.5 per cent or two
thirds of the national payment system, they only account for 6.6 per
cent of the throughput value. It’s definitely a case of more bark than
bite where systemic risk proponents are concerned.
But
having said that, the attraction to track the M-Pesa movements from a
tax collection perspective goes without saying. Even though the values
may be low, M-Pesa provides an excellent opportunity for the taxman to
bring in smaller businesses into the taxpayer net as each transaction
has an electronic signature and trail. Designing and applying resources
to create that tracking framework may perhaps be where the challenge
lies.
That M-Pesa has changed lives goes without
saying. We live in a country where one can literally take a trip from
Mombasa to Malaba carrying zero cash, zero plastic card and with just
her phone be able to eat, drink and seek lodging for that entire trip.
The growth of the Lipa Na M-Pesa payment was 73 per cent year- on- year
in the half-year 2016 Safaricom financials.
This
means that there is rapid uptake by commercial establishments of the
payment option, which quite honestly presents a better cash flow option
than credit cards as there is no lag time between customer transactions
and when the funds are deposited into the business account (typically
2-3 days in the case of credit cards).
M-Pesa’s
metamorphosis is not inclined to stop here and a banking licence may end
up being required at the rate M-Pesa is transforming.
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