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THE POWER OF M - Diversification galore in Kenya.

Summary: Kenya was the birthplace of mobile money in Africa. It is still the most important trendsetter on the continent when it comes to mobile money. A diversification of both the number of banks offering mobile money in Kenya and of the services on offer through mobile money looks set to increase in the coming years. So does a push to get those Kenyans who are still not using mobile money on board. Report by Sherelle Jacobs.

Diversif icat ion is one of the key characteristics of Kenya's mobile banking future. Safaricom, which has been a real trendsetter in the area of mobile money in Kenya, has been at the centre of a lot of the action. For example, it has recently partnered with the Bank of Africa to introduce M-Chama, a brand new mobile banking service, which is predominantly aimed at investment groups. It is an add-on to the existing banking platform called B-Mobile, which offers Bank of Africa customers mobile banking solutions.

The new service M-Chama allows members to make money transactions with their joint accounts using their mobile phones. Other members of the account will then be sent an SMS alert of the transaction which they can then approve. Users also have the ability to apply for loans for the joint account. Other members can then approve the transaction, which can then be made via M-Pesa.

M-Chama comes at an auspicious time for Kenya as investment clubs are proving a popular trend among the business community and over recent years many of these have ended up blossoming into highly successful firms. M-Chama's launch coincides with the unveiling of positive business results figures by Bank of Africa; the financial institution announced that it had achieved 101% growth in profits before tax year on year over the nine months to September 2013.

An impor t a nt a spec t of t he ' diversif icat ion' t rend in mobile banking in Kenya is the offering of loan services through mobile money; mobile customers in the country are increasingly able to not just pay for items and save money through mobile money accounts but they are also able to borrow money.

According to the Central Bank of Kenya, the number of people borrowing loans in Kenya increased by 1.7m over the six months to June in 2013 to 3.8m, a 82% increase compared with the 95,000 new borrowers which applied for loans throughout 2012. This is likely to have been partly helped along by the recent introduction of the mobile banking-based loan produce M-Shwari in November 2012 by Safaricom and the Commercial Bank of Africa.

M-Shwari enables users to not just open a mobile money account but also borrow, subject to their M-Pesa records. When M-Shwari was launched in 2012, Michael Joseph, former Safaricom CEO, now Global Director of Mobile Money for Vodafone, said: "M-Shwari is a transformational service: saving is no longer the privilege of an elite; all Kenyans can now save, even the smallest amounts and at their own pace. M-Shwari is a truly mobile proposition, which leverages the power of mobile communications to provide simple and valuable access to banking services," he added.

M-Shwari experienced formidable success when it was first launched, attracting 3.5m customers, racking up $11.7m in savings and handing out $22.4m in loans. The M-Shwari product is in constant development; users are now able to apply for loans worth up to Ksh8,000 ($90), subject to their savings history. Other banks are keen to get in on the action and have been busy launching their own mobile banking products, which also offer loans services. For example, Family Bank in December 2013 launched Pesa Mob, which allows clients to apply for loans using their mobile phone.

At the launch of Pesa Mob, Safaricom CEO Bob Collymore, said: "Incorporation of new technology in the mobile phone and banking industry will not only make money transfer much easier, but will a lso help in adoption of technology in other sectors of economy in the country."

Kenya Commercial Bank a lso launched its own mobile banking platform, M-Benki, towards the end of 2013. In a statement, Kenya Commercial Bank described the new service as "easy, quick and giving instant access to all banking services once the registration is validated online using the services".

"This mobile-banking platform will accelerate the reach to the unbanked in the country in a convenient, easy and simple manner without personally v isit ing a branch to open a bank account supporting our f inancial inclusion agenda," KCB Group CEO Joshua Oigara said.

As a result of this new emphasis on mobile money borrowing in Kenya, analysts have started to question whet her Kenyans may le apf rog traditional credit cards, which are popular with consumers in many Western countries, in order to pay for items when they have problems with cash flow or need money to see them through until their next pay day.

That so many dif ferent banks have launched mobile money lending products in such a short space of time is testament to the intensifying competition between Kenya's financial institutions for a slice of the profits to be made from mobile money. Competition is not just limited to borrowing-related products either.

For example, Barclays is keen to tap into the demand for cash transfer services. In December, Barclays Kenya introduced a mobile transfer service ca l led CashSend, which enables customers to use ATMs to either send or receive money from people using their mobile phone to make a transfer. At the launch of the product, the managing director of Barclays Bank Kenya, Jeremy Awori, said: "CashSend is a trendsetting product that will allow Barclays customers to electronically transfer funds through a Barclays ATM to a recipient, who is then able to withdraw the funds from any Barclays ATM, without using a card or having a bank account."

Massive leap in transactions

Kenya is already the leader in Africa when it comes to mobile banking penetration. Nearly a quarter of people in Kenya use mobile banking and roughly 50% of people are interested in mobile banking, according to TNS data. This is a much better result than in other African countries. For example, in South Africa just 9% of people use mobile banking while in Africa's most populous country, Nigeria, the figure is relatively low at 6%.

Mobile banking uptake has risen noticeably over the last five years in Kenya, according to the 2013 Fina Access National Survey. The study found that mobile money service usage has increased from 28% in 2009 to 62% in 2013. The report also found that 11.5m people in Kenya use mobile money in comparison with 5.4m who use traditional banks.

Mobile money proved most popular in Nairobi, with 84% of locals using such services. In all other areas of Kenya mobile money usage was at least 50%. This is in comparison with the growth in the use of banks, which has also roughly doubled from 13.5% in 2006 to 29.2% last year. It does seem that mobile money might be killing demand for debit cards; debit card transactions in Kenya plummeted in value last year from $1.6bn in February 2013 to $1.15bn in October 2013.

Nonetheless, it is still clear that the mobile money penetration rate could be higher in Kenya because the country does not actually have the highest mobile phone penetration rates in Africa. The mobile ownership rate in Kenya is 71% compared to 93% in Cote d'Ivoire, 90% in Senegal, 90% in South Africa, 88% in Ghana and 82% in Nigeria. These figures, which reveal that mobile penetration should actually be around 20% higher to be on par with the leading African countries, are an indication that mobile banking could actually reach a far larger number of people in Kenya.

This means that further uptake of mobile banking in Kenya will be at least partly dependent on how successful mobile phone and telecoms companies are at getting those Kenyans currently living without mobile phones - and they are likely to be those from lower income brackets - to invest in one. Their success in this will, in turn, hinge on the ability of mobile phone companies to offer low-cost but highvalue service and the ability of telecoms companies to offer competitive and high quality coverage, including in the rural areas of Kenya.

In the meantime, concentrating on how best to target existing mobile phone users makes sense for those offering mobile money services and it is clear that Kenyan firms are keen to zone in on particular groups of people who have, until now, underutilised mobile money services. For example, Safaricom recently inked an agreement with the East African Breweries, which will allow beer distributors to carry out payment transactions through the M-Pesa system rather than relying on cash to do all of their deals. The new service is aimed at making the lives of distributors easier by making the collecting of money more efficient and eliminating the risks that dealing in cash brings. At the moment around 36,749 merchants use Lipa na M-Pesa but Safaricom aims to increase the number of clients to 100,000.

According to a study by CGAP, the likelihood that a person with a mobile phone will start using mobile banking depends on two key variables. First, the nature of the social network of someone who already owns a mobile phone is important. More specifically, the number of individuals already using mobile money who a person knows is important. If someone has links to five people using mobile money then they are three and a half times more likely to start using mobile money compared to a person who knows just one person using mobile money, according to the report. According to the report, if a person does twice the number of mobile money transactions as the average mobile money user then they are likely to have twice as many people taking up mobile money in their network. Therefore if Kenyan banks and telecoms firms concentrate on getting existing users to intensify their engagement with mobile money this may in turn increase the number of new users.

People also seem more likely to use mobile money technology if they are already rapacious mobile phone users. Those who adopt the technology spend three or even four times more on phone credit than those who do not. According to the CGAP study, people who take up mobile money use call twice as much as those who do not. They also send twice as many texts and eat up more data. All this seems to hint that people who adopt mobile money are either real technology lovers or they have a higher disposable income than non-users to begin with. Current trends in Kenya suggest that adoption among the less well off is possible. For example, from 2008 to 2011 the proportion of poor using M-Pesa and based outside the Kenyan capital Nairobi surged to 72% from a much lower 20%. ua

'Incorporation of new technology in the mobile phone and banking industry will not only make money transfer much easier, but will also help in adoption of technology in other sectors of economy'

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Publication:African Banker
Geographic Code:6SOUT
Date:Feb 17, 2014
Words:1888
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