M-Money - Convenient or Costly?
Sunday, January 22, 2012 at 5:47PM
Kim Wilson

Despite the hyping of mobile money, on a visit last fall to Tanzania, a country poorer than its Kenyan neighbor, I barely saw evidence of M-PESA at least in rural areas around Arusha.

Likely places to see “M-PESA” – shopping strips filled with money-changers, banks, and other transfer facilities – do not feature it, or at least do so less than in Kenya where signage and stalls are chock-a-block.

Why is this so? Various theories explain thinner uptake ranging from fragmented telco markets to differing patterns of migration and household behavior. And others say, “no”, it’s growing just fine. But, when I asked why members of savings groups in and near Arusha why they were not using M-PESA, they said: “it is too expensive.”

The M-PESA site itself tells this story:

“Registered M-PESA customer Goodson Kimani needs to send Tsh 4,000 to his mother in Tanga. Mama Kimani (who is also a registered M-PESA customer) has no money in her M-PESA account.

Goodson must have at least Tsh 4,700 in his M-PESA account. He sends Tsh 4,500 to his mother via M-PESA. Tsh 200 is deducted from Goodson’s M-PESA account as a ‘Send Money to Registered Customer’ transaction fee.

Mama Kimani is notified via SMS that she has received Tsh 4,500 from Goodson. Mama Kimani’s M-PESA account now has Tsh 4,500. Mama Kimani goes to an M-PESA agent in Tanga and withdraws Tsh 4000. Tsh 500 is deducted from Mama Kimani’s M-PESA account as a transaction fee for withdrawal by a registered customer.

Mama Kimani and her good son end up paying, 700 on a 4000 on a remittance: 17.5%.

Perhaps the expense factor plays a role in why a recent study by Guy Stuart finds that even in Kenya, motherland of M-PESA, the service facilitates 4% of household transactions, with the rest transacted by cash. This finding comes as somewhat of a surprise to those of us impressed by M-PESA’s reach of 17 million people in Kenya. 

As major donors rush to catalyze the creation of mobile money infrastructure, they might weigh in on the business policies that surround it. Poor consumers might feel a little more than trapped inside each new currency: it costs a lot to move or withdraw digital money or to switch digital currencies (from M-PESA, say, to Zap). The moneychangers are making all the money. No wonder cash is king.

To be clear, M-PESA is a breakthrough. Along with other providers of mobile services, it is one of a handful of bright and shiny things in inclusive finance. In fact, savings groups at the core of this blog use M-PESA expedite savings and loan payments of members. But maybe it’s time to reign in our glee around M-PESA’s possibilities. The service is costly and won’t help our groups much until this new currency feels less like a rip-off and more like a bonus.  That, indeed, would start to feel like real inclusion.

Article originally appeared on Savings Revolution (http://savings-revolution.com/).
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