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September 24, 2017

M-Pesa boss shrugs off Safaricom split concerns, sees opportunities

A man walks away from a retail mobile money transfer shop in Ngong township in the outskirts of Kenya's capital Nairobi July 15, 2013. To match Insight AFRICA-MOBILEMONEY/ Picture taken July 15, 2013. REUTERS
A man walks away from a retail mobile money transfer shop in Ngong township in the outskirts of Kenya's capital Nairobi July 15, 2013. To match Insight AFRICA-MOBILEMONEY/ Picture taken July 15, 2013. REUTERS

“To be honest, I do not lie awake thinking about the challenges rather the opportunities we still have to deliver on,” Safaricom's director for financial services and head of M-Pesa Ronald Webb told the Star in an interview. This was in response to proposed legislation to split the operations of telecommunications firm from mobile money transfer services.

“An enormous positive impact on the Kenyan economy is what we are most proud of…”

Safaricom marked 10 years since the launch of M-Pesa on March 6, 2007 by UK's Vodafone, which holds a 40 per cent stake in East and Central Africa's most profitable company.

Days to the 10th anniversary of the world's most successfully mobile money transfer service, two similar developments surfaced.

A draft report commissioned by Kenya's telecoms regulator, the Communications Authority of Kenya, was leaked and published in one of the dailies on February 23. The document, by UK's research and advisory firm Analysys Mason, is said to have recommended the separation of M-Pesa from Safaricom because the firm is too dominant.

Separately, National Assembly deputy minority leader Jakoyo Midiwo on March 1 proposed amendments to the Kenya Information Communication Act with a view to splitting the two entities. Midiwo argues that Safaricom is offering banking services without proper licensing.

ICT CS Joe Mucheru on March 9 however opposed the proposed legislation, saying the government was keen fully enforcing infrastructure sharing, interoperability and price changes to address issues of dominance if they arise.

“The government has been very clear that it does not want to split M-Pesa from Safaricom, it has been one report by an external party and we don’t even have sight of that report,” Webb says.

M-Pesa started off as a pilot project aimed at assisting women in agriculture in 2005, and has now grown into the largest mobile money transfer platform not only in the country but in the world.

Leveraging the power of the mobile phone to achieve convenience, M-Pesa has over the decade provided customers with a platform that allows timely savings as well as increased safety and wellbeing stemming from the need to not move around with hard cash.

“One of the huge steps we made is when we got the go ahead from the regulator here to innovate and launch M-Pesa. We had a regulator that believed in open innovation and believed in investment,” Webb says.

In first year of operation, the company targeted 70,000 customers but ended up bagging over a million customers due to popularity of the product as it facilitated an easy and quick solution to cross-country money transfers. Since then it has been an upward trajectory for the mobile money transfer service.

Prior to M-Pesa, most individuals were limited to sending money to the rural areas from the city by giving drivers envelopes of cash to deliver home all the while hoping that the money would get there in one piece.

At the time, bank branches were a considerable journey away for most people unless you were fortunate enough to live in the city therefore the cost of access was very expensive and also most of the banks were chasing away small customers.

“This was the first sweet spot, and is still an enormous part of what we do,” says.

With over 26 million subscribers on the platform, 19 million of whom are monthly active users, M-Pesa’s success has been largely driven by the mobilization of agents.

“What M-Pesa did that made it hugely successful is that they understood very early on, the critical importance of agents. People get value in and out of the M-Pesa ecosystem which is allowing agents to provide services close to where the customers were,” says Webb.

As a stakeholder group, M-Pesa agents experienced the second highest Social Value from M-Pesa at Sh20.1 billion in the year ending March 2016, according to KPMG’s True Value Report published in July 2016. Agents increased from 2,000 in 2007 to well over 130,000 at the end of February 2017 with many agents creating entire businesses out of M-Pesa.

One such business is Wabcom Group. In 2008 Julius Kirago created Wabcom Technologies to offer consultative solutions and employee training. This arose from the need for competent employees in his M-Pesa outlets which by then had increased to four outlets in Nakuru.

“We did not know what we were getting into at the time, we just thought it was interesting and that it would make for a good side business,” said Kirago.

Kirago now has over 200 M-Pesa outlets across the country majority of which are in Rift Valley. He said that M-Pesa is the reason for his success.

“We are doing well in the sense that we have received a number of awards in the category of best M-Pesa agent,” said Kirago.

The agents are not just good for M-Pesa but have been seen to have a positive contribution to uplifting poverty stricken households and the facilitation of financial inclusion with an emphasis on women and single parent homes.

The KPMG report shows that the density of agents – how close an agent is to the customer – has a direct correlation to how many people get lifted out of poverty.

“On average across the country, people are in close proximity to five agents and at that density, the survey shows that we lift 4 per cent of Kenyan households out of extreme poverty,” said Webb.

Customers have been the biggest beneficiaries of social value given by M-Pesa, receiving a return in value of Sh160 billion, according to the KPMG report. They grew from 20,000 in March 2007 to more than 20 million in 2017, while the value of transactions grown from Sh10.3 million to Sh5.2 trillion over the same period.

Globally, Vodafone – the owner of M-Pesa – offers the service in 9 other countries, including Albania, the Democratic Republic of Congo, Egypt, Ghana, India, Lesotho, Mozambique, Romania and Tanzania.

As of the end of December 2016, M-PESA served almost 29.5 million active customers through a network of more than 287,400 agents in the ten countries. During 2016, the service processed around 6 billion transactions, peaking in December 2016 at 529 transactions per second.

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