www.microlinks.org/afterhoursAfter Hours

Like us on Facebookfacebook.com/microlinks

#MLevents

Participate during the seminar

Follow us on Twittertwitter.com/microlinks

Mobile Banking and Financial Inclusion: The M-PESA Case Study

Billy Jackwgj@georgetown.edu

February 9, 2011

Claire Alexandreclaire.alexandre@gatesfoundation.org

M-PESA: Kenya’s mobile money

After Hours Seminar, USAIDFebruary 9, 2011

William JackGeorgetown University

Tavneet SuriMIT Sloan School of Business

Financial Intermediation

Mobile telephony in Kenya

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0

2

4

6

8

10

12

14

16

18

1998 2000 2002 2004 2006 2008 2010

Mill

ions

of s

ubsc

riber

s, fi

xed

lines

Mill

ions

of s

ubsc

riber

s, m

obile

serv

ices

Mobile lines M-PESA users Fixed lines

The solution: M-PESA

The M-PESA concept

• Remote account storage accessed by simple SMS technology

• Cash-in and cash-out services provided by M-PESA agents

Adoption of M-PESA

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

Num

ber o

f Reg

istr

atio

ns

Growth of Agents

0

5000

10000

15000

20000

25000

Num

ber o

f Age

nts

June 2010Note: partial data only

Transaction costs

0

200

400

600

800

1,000

1,200

1,400

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Tarif

f

Amount deposited and sent

Postapay M-PESA: Reg to non-reg M-PESA: Reg to reg Western Union

Reaching out

0%

20%

40%

60%

80%

100%

1 2 3 4

Poor Quartile Rich

Share of each quartile who are M-PESA users

2008

2009

Reaching down

0%

10%

20%

30%

40%

50%

1 2 3 4

Poor Quartile Rich

Share of all M-PESA users from each quartile

Uniform use across income distribution

20082009

30%

40%

50%

60%

70%

Women Men

Share of all M-PESA users by gender

Reaching women

2008

2009

Uniform use by gender

2008 2009

Women 14.7% 40.2%

Men 24.9% 51.1%

User shares by gender

Increased penetration

0%

20%

40%

60%

80%

100%

Rural Urban Unbanked Banked

20082009

x2

x2

Share of each group who are users

Uses of M-PESA

0%

20%

40%

60%

80%

100%

2009 data

Share of households

Transactions

2008 2009 Send Receive Send Receive

Total 46% 38% 49% 45%By geographic locationRural 34% 36% 36% 45%Urban 55% 40% 58% 46%By M-PESA useNon-user 32% 26% 17% 19%User 65% 54% 63% 58%

Internal remittances in Kenya

• Suggestive of net urban-rural flow?• M-PESA →remittances, or remittances → M-PESA?

> ><

Shares of households making remittances

<

^ ^ ^ ^

M-PESA adoption and remittances

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Round 1 Round 2

Share who send money

Never

Late

Early

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Round 1 Round 2

Share who receive money

Never

Late

Early

Frequency of M-PESA Use

2%

5%

6%

43%

14%

4%

4%

24%

0% 10% 20% 30% 40% 50%

Daily

Weekly

Every 2 weeks

Monthly

Every 3 months

Every 6 months

Once a year

Less often

How households save

0%

20%

40%

60%

80%

100%

2008

2009

By 2009, half of all households said M-PESA was one of their two most important savings instruments

Impact on risk• Life in developing countries can be precarious

– Crop failure, Health shocks, Job loss, etc.

• M-PESA users are much better able to protect themselves against these shocks than are non-users– True for households with users– ….for households who live close to M-PESA agents– ….for both

• Mechanism is remittances– M-PESA users are more likely to receive help when hit by bad

luck– ….and if they receive anything, they receive more

Beyond remittances

• Bill-pay options – e.g., power, insurance, etc.

• Local public goods: purchase and maintenance

• B2B use and business development

• Micro-finance

• m-health

Bill pay

The problem of local public goods

Finance

Grundfos and mobile money

Accountability

Sustainability /Community

development

http://www.grundfoslifelink.com/int/03_how_we_do_it_payment_system.html

B2B transactions

• Can mobile money help rationalize retail distribution?

Supplier-financed trade credit

Distributor

Retailer

Product

Bank-financed trade credit

Distributor

Retailer

Product

Mobilizing Micro-finance

High-touch model

• Group meetings• Cash transactions

• Paper book-keeping

Low-touch model

• Infrequent meetings• E-money transactions

• Electronic book-keeping

cost cost

m-health

• SMSs to improve ARV adherence

• Maternal health management

• Vouchers via M-PESA – Lifelink for health workers?

• Saving during pregnancy?

• Crowd-sourced accountability

www.microlinks.org/afterhoursAfter Hours

Like us on Facebookfacebook.com/microlinks

#MLevents

Participate during the seminar

Follow us on Twittertwitter.com/microlinks

THANK YOU!For more on this topic, check out the resources below!

•FS Shares Series #9, Enabling Mobile Money Interventions & Innovations in Financial Services Delivery: Branchless Banking. Chemonics. Available athttp://bit.ly/aO7VJr

•Mobile Banking Technologies: Improving Financial Access for the Unbanked. Microfinance Club of New York. Available at http://mfcny.org/node/188260

Innovations in Financial Services Delivery: Branchless Banking. FS Share. Available at http://www.fsshare.org/content/innovations-financial-services-delivery-branchless-banking-0