Does Mobile Money Build Savings?
In the four years since the introduction of Safaricom’s M-Pesa there has been a massive growth in the use of mobile money in Kenya as a financial tool, for the unbanked population – i.e. people who did not operate bank accounts because they could not afford to or had little use for the bank products on offer.
Today, Kenya’s four mobile operators all have money transfer facilities, which their subscribers (both banked and unbanked) use to:
– Send money to friends, relatives
– Pay utility and other business bills
– Receive payment
But as much as the ability of over 15 million Kenyans to send or receive money from their phone handsets does it enable them to save money? Arguably not because of three reasons
1. Mobile companies are not banks and don’t pay interest
2. Banks have approached mobile money as an extension of their high cost accounts
3. Savings requires discipline, education, and record keeping. It should also be rewarding, and the easy access to make payments or withdraw cash by phone can drain savings faster than they can be topped up
However, there is some optimism about mobile phone savings possibilities now owing to closer partnerships between mobile companies and banks.
Banks have now largely abandoned their own mobile phone platforms to embrace the telecom operators. This has extended in the last the years from just operating m-pesa counters in bank halls, to float facilities for mobile money agents, to enabling people to load money by phone into /from their bank account.
This culminated in a marriage of mobile money and savings. Kenya’s Equity Bank, a pioneer in many local bank innovations, led the way in a partnership with Safaricom dubbed M-kesho. Michael Joseph, Safaricom’s former CEO claims credit for innovating m-kesho, which he emphasized, would empower people in their ability to save money.
Speaking at a public talk at the Nairobi iHub in October last year he said M-Kesho allows people to save in small increments, and get interest immediately is a revolutionary product – and in 3 months they signed up 700,000 new M-kesho savings accounts (which was more than all the saving accounts that existed in the country)
M-Kesho’s fanfare has somewhat diminished in the last few weeks since Equity transferred its marketing muscle to another new product with a second mobile operator – Orange’s Iko Pesa which offered an easier link between mobile phone and the Bank, and today Equity now has partnerships with three of Kenya’s four mobile operators.
However there is still a gap in terms of tools that are crucial to build savings; these include budgeting, record keeping & tracking (procuring a statement from m-pesa and other mobile cash platforms is a clumsy process), and most important automatic savings enablers like standing orders and dividend reinvestments.
For now, some savings can be realized by default since there are few credit options on the mobile phone – most transactions require a buyer to have cash and are not offered on credit terms. That could change in the future, and when it does, it will add another challenge to mobile savings by bringing a new outlet for cash (savings) to trickle out of the mobile phone.