The fall in cash handled by mobile money agents is indicative of reduced transaction values by customers in cash deposits or withdrawals.
The latest leading Economic Indicator by the Kenya National Bureau of Statistics for nine months to September shows the value of mobile money transactions declined by 2.79 per cent, year-on-year to Sh5.09 trillion for the first time since 2009.
This is despite the number of transactions growing by 6.79 per cent to 1.59 billion during the period under review.
On a monthly basis, the total value of mobile money transactions decreased from Sh684.64 billion in July 2023 to Sh666.63 billion in August 2023.
Although the statistics body did not give reasons for the drop in transaction value, economic experts are linking it to the current tough financial situation globally which has pushed up production and living costs.
"Companies are closing, more people are losing jobs, the shilling is dropping against major currencies, and the cost of living is rising on high fuel costs. This is the true indicator of a struggling economy,'' Jared Mbai, lead economist at Fast Lane Capital told the Star.
According to him, Kenya is almost a cashless economy. This is why, over 50 per cent of our transaction is happening digitally.
His colleague Judy Nekesa is worried. She wonders why the transaction value is sinking now despite defying the tough Covid-19 pandemic to maintain growth.
"The shaky financial situation is likely to worsen as the tough tax regime kicks in. Businesses, I'm told now prefer cash to mobile payments,'' she said.
Small businesses in Kenya are increasingly rejecting mobile money payments in favor of cash as they look to sidestep aggressive tax compliance measures.
The shift, witnessed starting last month follows the deployment of 1,400 paramilitary-trained field officers by the Kenya Revenue Authority (KRA) across the country at the end of September.
The field officers, known as Revenue Service Assistants, have been visiting businesses to ensure their compliance with tax requirements.
Confirming the trend, the Kenya Revenue Authority (KRA) last month disclosed that it would seek information on the businesses opting out of mobile money payments from Safaricom, the telco that operates mobile money service M-Pesa and its business-specific payment solution Lipa Na M-Pesa (Pay with M-Pesa).
M-Pesa, a mobile money product by Safaricom Plc has a 99 per cent share of the mobile money market in Kenya.
Last week, Safaricom Plc's overdraft facility, Fuliza recorded a 40 per cent drop in earnings for the first six months of the year as borrowers turned to the more affordable state-backed Hustler Fund.
The telco's results for the first six months of the year to September 30 show Fuliza's contribution to Safaricom's bottom line in the review period dropped to Sh2 billion from Sh3.4 billion the previous year.
The drop is attributed to a reduction in loan size by Sh60, with the average loan per person dropping to Sh260 from Sh320.90 in the same period last year.
The low spending and borrowing power has squeezed both businesses and families to the corner, pushing up the cost of living.
Inflation - a measure of the cost of living over the past 12 months - rose for the first time in five months to 6.9 per cent in October from 6.8 per cent a month earlier. This was the first increase since eight per cent in May.
The shilling on the other hand continued with its depreciating trend, closing the day at Sh152.33 according to the Central Bank of Kenya and an average of 156 units against the greenback in the parallel market.
Latest data from the Central Bank of Kenya (CBK) show that the stock of non-performing loans (NPLs) in Kenya surged to a 16-year high of 15 percent in August, up from 14.5 per cent in July.
This translates to more than Sh596 billion, worked as a share of the total loan book.
While the value of transactions dropped, the number of mobile money agents increased from 330,912 in July 2023 to 333,428 in August 2023.
During the same period, the number of mobile money subscriptions rose from 77.21 million to 77.55 million.
