Kenya Case Study: Who Is Using Mobile Money?

Mobile money is a hot topic in international development and often billed as a technologically elegant and low-cost solution to broadening access to financial services. Kenya has been at the cutting edge of mobile money since the M-PESA transfer service was introduced in 2007; M-PESA boasted more than 7.5 million registered users in 2009; as of October 2009, Safaricom said it had handled transfers totaling more than 230 billion Kenyan Shillings (approximately $3 billion) within Kenya. [1]  A recent innovation, announced in October 2009, will allow remittances from the United Kingdom to be transferred directly to M-PESA users. [2]  Following on the success of M-PESA, new players are entering the Kenyan mobile money market and replicating such services in other countries. Nokia, Essar, and Telkom Kenya, among others, have all begun moves to participate in this growing market. [3]

Most of the current data available on mobile money in general or in Kenya specifically, are based on the service providers’ records: registered users, transactions conducted, and so on. The AudienceScapes 2009 survey data from Kenya add a new dimension to this area of research by offering a national, consumer-based perspective on who is using mobile money, and why (for which financial services) or why not. In particular, the richness of the dataset allows us to investigate a key question in the development community: is mobile banking really expanding access to the previously unbanked, or is it mostly making access easier for those few who already are active in the financial sector?

Since this is the first AudienceScapes survey of Kenya, we cannot track trends over time. However, the snapshot taken in 2009 provides reasons for optimism in the development community: many of the survey respondents who said they use mobile money are relatively poor, rural dwellers or otherwise outside the traditional centers of formal banking.

 The Mobile Money Market

The survey corroborates evidence from other sources that there is a large market for mobile money, broadly defined, in Kenya. [4]  More than half of all respondents (55 percent) in the AudienceScapes survey said they had used a mobile phone at some point for money or financial business (e.g., to send or receive money, pay bills, and so on). Most, however, are using mobile money for a single reason: to send or receive money transfers.

Fewer than 20 percent of users of mobile financial transactions in the survey (who totaled fewer than 10 percent of all respondents) said they were also using phones for other financial services such as managing a savings account (Chart 1).

Chart 1
                

The consumer base for these transactions appears to be fairly broad:

• Slightly more than half of the mobile money market (56 percent) live in rural areas, and there are users in every region of Kenya.
• The vast majority (89 percent) of those who have used mobile money have a mobile phone available in their household, and almost all of those said they personally owned a phone. Forty-eight percent of mobile money users are women.
• Mobile money users cover a wide age range—from 15 to 75—though they are somewhat younger on average than those who have never conducted a financial transaction by phone (40 percent of mobile money users are 20 to 29, compared to 23 percent of nonusers).
• The majority of users (57 percent) describe their economic status as having “enough money for food and clothes and can save a bit,” with roughly equal numbers above and below that level.
• Seven percent of mobile money users said their family does not have enough money even for food; all of these respondents said they have either sent or (more likely) received money transfers, but a handful also reported having managed savings wirelessly.
• Mobile money service consumers are, on average, highly educated: 71 percent have at least some secondary schooling, 26 percent have primary schooling, and 3 percent have no formal education.
• Eighty-two percent of mobile money users said they speak and understand English—far more than the 48 percent of other respondents.

A sizable number of respondents (about 12 percent) said that they do not need to conduct financial transactions by mobile phone (Chart 2). A similar number said they prefer to conduct financial transactions in person rather than by mobile phone. However, such respondents do not fall into a clearly definable demographic group. Other reasons for not using mobile money included cost, lack of trust in them and the complexity of using such services.

Chart 2
                  

Based on these responses, a two-pronged approach would likely be necessary to expand the use of mobile banking, focusing both on access and on perceptions or understanding of available services.

Mobile Money Take-up Rates

There is clearly great demographic diversity among the consumers of mobile financial services, but this masks to some extent the drastically different take-up rates among different types of people, particularly people with different levels of education or people living in different regions (see Chart 3 below). The gender gap is statistically significant but not egregious: 58 percent of men said they had used a mobile phone for financial transactions, compared to 51 percent of women. There is also a small but statistically significant age gap: younger respondents (15 to 44) were more likely to say they had conducted some financial transaction using a mobile phone than those over 45.

Take-up rates were substantially higher among high-income individuals. Noteworthy—and perhaps encouraging to those who hope mobile money will provide new opportunities to the poor—is that 35 percent of people in the survey who said they were living on less than the equivalent of $1 per day reported using mobile money services. This is much lower than the 78 percent rate for people making more than $6 per day (the top fifth of reported incomes), but it is high enough to conclude that these financial services are not beyond the reach of some of the poorest Kenyans.

Education and geography appear to be closely related to individuals’ use of mobile money (Chart 3):

Chart 3
                 

Rural residents were less likely to say they had tried mobile money services (47 percent versus 69 percent of urban residents), but the more striking geographic difference is across regions. Relatively low use rates in the Eastern, Coast and North Eastern regions suggest a need for more concerted efforts in such areas to overcome some of the barriers to use previously mentioned.

Mobile Money and Use of Other Financial Services

Proponents of using mobile money to extend financial services to the unbanked may draw encouragement from survey data showing that 42 percent of the respondents without access to a bank, a banking cooperative or a sacco said they have used a mobile phone for financial transactions. However, these people typically had only used phones for sending or receiving money transfers; fewer than 10 percent reported using any other mobile financial service.

There is also evidence in the survey that people who already use formal bank accounts are more likely to use mobile money services: 85 percent of all those with bank accounts said they had conducted financial transactions by phone, versus only 40 percent of all those without bank accounts. This suggests that mobile banking may be falling somewhat short of a “leapfrogging” technology that would be taken up at equal or faster rates by the unbanked than by those already engaged in formal banking. The results are similar, but less stark, for informal banking: 71 percent of those who saved with an informal savings club had used mobile money, versus 47 percent of those who had not saved informally.

Mobile Money and Media/ICT Habits

People who said they had used a mobile phone for financial transactions were more frequent users of most news and information sources, including newer ICTs such as SMS and the internet (Table 1).

                   

The top sources of information about using mobile phones for financial transactions among people who had actually done so were radio (cited by 71 percent of mobile money users), TV (cited by 41 percent), friends/family (33 percent) and newspapers (24 percent).

All of these rich data about mobile money users in Kenya suggest lessons not only for Kenya, but also for expanding financial services in other countries.

Mobile money appeals to people across the demographic spectrum—there were users even among some of the most disadvantaged groups—but the best-educated and wealthiest (and those in more-connected, urban areas) were far more likely to say they have used mobile financial services.

Therefore, further outreach may be necessary to explain mobile money to less-educated consumers, and to make the most basic services affordable to the poor (in particular, making the receipt of money transfers accessible).
 
Respondents who actually had bank accounts were more than twice as likely to use mobile money services as those who did not have a bank account. Many people without even access to a bank also use mobile money, which is encouraging, but outreach and expansion efforts should reflect the reality that the unbanked are still less likely to use mobile money.

Among people who said they had not used mobile money, radio and friends and family were far and away the most widespread sources of news and information—more than 80 percent said they had received news and information from each source in the previous week. Using radio messages or call-in shows targeted at people who have not used financial services via mobile phone, or encouraging existing customers to discuss their experience with unbanked friends and family may therefore be the best bet for informing potential users about mobile money.

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 [1] “M-Pesa Launches Diaspora Service,” Press Release, Safaricom, 13 October 2009. http://www.safaricom.co.ke/index.php?id=1159 
 [2] Ibid. 
 [3] “Kenya: Companies Enter Mobile Money Transfer Market,” AllAfrica.Com, 31 August 2009. http://allafrica.com/stories/200908310919.html
[4] See, for example, research by CGAP and GSMA, summarized in “Mobile Banking: From Concept to Reality” at Consultative Group to Assist the Poor. http://www.cgap.org/p/site/c/template.rc/1.26.10806/