The Rise of Mobile Mobile and Mobile Savings in Kenya

Gabriel Demombynes

World Bank - Nairobi

World Bank Group

The Big Picture on Mobile Money

Are Mobile Savings Tools

Reaching the Poor?

How Does Mobile Money Work?

More than 15 million mobile money customers at end of 2010

Value of person-to-person transactions alone exceeds 20% of GDP

0%

5%

10%

15%

20%

25%

2007 2008 2009 2010

Monthly Value of Person-to-Person Transfers as % of GDP

Trend with Forecast

Mobile money transfers usage is highest among urban Kenyans

Men are more likely to use mobile money for transfers than women

73%

64%

Men Women

Mobile money usage for transfers is highest among those aged 25-29

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

15-17 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

What Does Mobile Money Do?

Reduces costs of …

1) Money transfers across distance

2) Money storage

Possible Welfare impacts of lower cost of transfers

• Lower cost payments, including remittances

• Higher level, better timing of remittances

• Increased & more efficient investment in rural areas

Mobile money transfers have transformed the remittances industry in Kenya

0% 10% 20% 30% 40% 50% 60% 70%

Mobile money …

Friend/family

Bus/matatu

Post office

Western Union, etc.

Direct into bank

Cheque

Other

2006 2009

Remittances are largely wealth transfers from wealthier urban areas to rural areas

0

10

20

30

40

50

60

70

80

Richest 2nd Richest Middle 2nd Poorest Poorest Unknown Quintile

Billi

ons

of K

enya

n Sh

illin

gs

Deposits

Withdrawals

Have increased remittances helped?

• Qualitative evidence

• Mbiti and Weil (2011): mild evidence of increased farm employment in areas with widespread mobile money adoption

• Area of future research!

Are Mobile Savings Tools

Reaching the Poor?

Types of Savings Products

Savings Accounts

• Interest on savings• Deposit insurance• Security• Liquidity, dependent on

branch location• Highly regulated• Loans• Insurance• Payment and transfer

system

Mobile Money

• Liquidity • Payment and transfer

system• Security

Bank-integrated mobile savings

• Interest on savings• Security• Liquidity• Loans• Insurance• Payment and transfer

system

Bank account, SACCO, ROSCA

M-KESHO, KCB Connect, Pesa Pap

M-PESA, YuCash, ZAP

¾ of Kenyan households own mobile phone

Only 39 percent of Kenyan adults have a deposit account

… mobile phone networks offer the potential to reach a large number of unbanked individuals.

Measuring savings in 2010 survey

“Do you save any portion of your income?”

… with M-KESHO, etc Bank-integrated mobile savings

… with M-PESA? M-PESA savings

“How much on average do Positive M-PESA balances

you retain on your M-PESA

account?”

ALL DATA ON SAVINGS

ARE ONLY FOR THOSE WHO USE M-PESA

Reported “mobile savings”among M-PESA users

74%

37%

6%

0% 10%20%30%40%50%60%70%80%

Positive M-PESA balances

M-PESA savings

Bank-integrated mobile savings

Reported “mobile savings” by quintileamong M-PESA users

0% 20% 40% 60% 80% 100%

Poorest quintile

2nd quintile

Middle quintile

4th quintile

Wealthiest quintile

Bank-integrated mobile savings

M-PESA savings

Positive M-PESA balances

Why do people save? (M-PESA savers)

0% 10% 20% 30% 40% 50% 60% 70% 80%

Easily get loanBuy a new phone

To help other family membersFor purchasing a car or motorcycle

For social reasons (wedding, bride price)To leave something for my children

Avoid misuse of moneySecurity

For improving a houseTo purchase or build a house for my family

To purchase landFor agricultural inputs (seeds, fertilizer)

For starting up a new businessFor expanding an existing business

For my education and that of my childrenFor personal reasons (clothes, travel)

For later use in life/old ageFor meeting day-to-day household needs

For emergencies

Only M-PESA M-Pesa + other accounts

Bottom line (1)

• Much hyped “bank-integrated” mobile savings products like M-KESHO have not achieved wide use, and almost none among poor

• BUT, simple savings using mobile money is very common

Bottom line (2)

* We can’t show that M-PESA increases savings

BUT

* High-use of M-PESA among all Kenyans—especially urban poor

AND

* Large majority of M-PESA users—including those in poorest fifth—keep positive balances and many report M-PESA “savings”

Future attractions

• Impact evaluation of M-PESA based water payment system (joint with Billy Jack and Tavneet Suri)

• National survey via mobile phone and with incentives paid via airtime /mobile money (joint with local partners)

Thank You

Possible effects of mobile moneythat could increase growth

• More efficient allocation of human and physical capital

• Improved risk sharing more efficient investment

• Increased savings

Person-to-person transfers are dominant use of mobile money

2%

2%

2%

3%

3%

5%

5%

17%

26%

41%

74%

88%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Pay salaries/wages

Receive salaries/wages

Pay bills

ATM withdrawals

Buy goods/services

Receive customer payments

Make donations

Buy when travelling

Save money

Buy airtime

Send money

Receive money

How do we measure/define “savings”?

Income > consumption

Typology:

• Short-term safekeeping

• Medium-term accumulation to purchase asset or cushion shocks

• Long-term accumulation for retirement