The Diary of an M-PESA User: The Case of the Shoemaker in Kibera
by Olga Morawczynski: Tuesday, February 17, 2009
Olga Morawczynski is a doctoral candidate at the University of Edinburgh and a co-author with Mark Pickens of a forthcoming CGAP Focus Note on M-PESA. She has spent more than a year investigating customer adoption and usage in both urban and rural Kenya. Olga spoke at the Mobile Money Forum at the GSM World Congress in Barcelona earlier today.
Martin is a shoe-maker in Kibera, an informal settlement outside central Nairobi. He has set up a small stall along Kibera drive, the main entry point into the informal settlement. From this stall, he sells and repairs shoes to earn his “daily bread”. Martin lives alone in Kibera. His two wives and eight children live in his rural home, which is located in Western Kenya. Martin explains that a large segment of his earnings is sent “back home” to his family. He continues that he usually transfers money on a weekly, or bi-weekly, basis. He then holds up his mobile phone and explains that he always uses M-PESA to make such transfers.
During the fourteen months I spent in the field studying M-PESA usage, I met many entrepreneurs like Martin. Usually, these entrepreneurs lived and worked in Kibera and supported their family in rural Kenya. Many of them claimed that they would use M-PESA to send money home “regularly”. Others added that they would also use M-PESA for the storage of their money. To understand usage patterns in more detail, I handed out financial diaries to fourteen M-PESA users. In these diaries, I asked the participants in record anytime that money came into, and left their hands. They were asked to keep such records for the period of one month. Martin was one of the participants. An example of a day’s entry is given below:
| Money In | Money Out |
| - Money from work-630- Merry go round (ROSCA)-950
Total: 1580 |
- Porridge-10- Potatoes-10
- Mixed beans and maize-30 - Porridge-20 - Mixed beans and maize-10 - Sent money to wife through M-PESA-1000 - Sent money to mother through M-PESA-500 Total: 1580 |
Several interesting findings emerged from Martin’s diary. The first is related to the frequency of remittances. During the month that Martin had the diary, he sent money home five times. Three of these transfers were made to his wife, and two to his mother. The average value of each transfer was just over 1300 KES. These money transfers constituted a substantial portion of Martin’s income. A quarter of his total earnings (money-in) was remitted back to his rural home.
Martin also used M-PESA for the storage of his money. The diary revealed that 41% of Martin’s income was at one point stored in M-PESA. During the month, Martin deposited money into his M-PESA account fifteen times. Martin did not have a bank account. As there were no formal financial institutions within Kibera, Martin would have to leave the informal settlement to access banking services. Martin continued that it was difficult for him to make such a trip. He would need to shut down his business for the time that he was out of Kibera.
Another interesting finding, related to non-usage, emerged from the diary. Martin was not using the application for business transactions. That is, he was not collecting payments via M-PESA from customers. He was also not using the application to pay suppliers. Martin explained that his customers did not want to pay with M-PESA because it was too expensive. It would cost the customers an additional 30 KES just to make the transfer via M-PESA. Martin usually charged 100 KES for the repair of shoes. This was a significant portion of the transaction cost. Martin further explained that his suppliers were located in Kibera. He would pay them in cash as he picked-up his materials.
Many of the findings revealed here also emerged in the diaries of the other participants. For example, nearly all of the participants made frequent transfers back to their rural homes. They used M-PESA exclusively to do so. A forthcoming CGAP publication, which I co-authored with Mark Pickens, will describe such findings in more detail. It will also make clear some of the impacts that were generated through usage. As we argue in the report, users like Martin have experienced some substantial changes in their financial habits since adopting the application.
11 Comments
February 19th, 2009 at 9:53 pm, John ()
This is a very interesting report and it is very timely indeed. Do you have more details about the costs of loading and encashing M-PESA since the amounts seem a bit high and probably account for the limited use of M-PESA for small value transactions? In the Philippines, where the cost to send GCASH is P2.5 (US$0.05) and converting cash into GCASH is free at rural banks, we are finding quite a few people now using it for small value payments, especially in areas where employees are now accepting their salaries in GCASH. You can find several stories and examples of rural bank clients and their micro and small business customers now using GCASH as a form of payment which they can easily send back to the bank to deposit at http://blog.mobilephonebanking.rbap.org/
February 20th, 2009 at 6:54 am, Aber ()
Is this usual that M-PESA is not used for business payments?
February 20th, 2009 at 8:11 am, Jim Rosenberg ()
Aber,
In some cases, M-PESA is used to buy supplies for small shops, so in that way it is for business. Is that what you mean?
There is more on M-PESA at
http://www.cgap.org/p/site/c/template.rc/1.26.5102
February 20th, 2009 at 9:52 am, Aber ()
No, I mean is it usual for an entrprneur like martin to not use m-pesa for his business–taking cash for their goods, paying suppliers? In what cases is m-pesa used and not used for these small shops?
February 20th, 2009 at 10:24 am, Tera Smith ()
Great blog! Is the report published? Where can I find it?
Thanks,
Tera
February 23rd, 2009 at 12:35 am, Ismail ()
Very interesting and a useful report for the companies who wants to start remittance in own countries. It provides an idea of pricing and coverage as well.
March 6th, 2009 at 7:59 am, Mark Smith ()
Do you think that the patterns noted would be similar in other parts of Kenya?
March 9th, 2009 at 6:52 am, Olga Morawczynski ()
Aber, in Kibera many of the informal sector workers would pay their suppliers by hand. They explained that they did this because face-to-face contact was still a very important part of the exchange. Other suppliers compared the transaction cost of M-PESA to the cost of travel. If it was cheaper to send via M-PESA, then it was to pay for transport, then they would send via M-PESA.
Mark, I think that many of the patterns noted here would be similar in urban centers of Kenya. I found out from the diaries that the urban centers and rural areas have their distinct financial patterns. M-PESA is used differently in these two contexts. For example, many residents in rural Kenya also send money to relatives. However, even if they are M-PESA users they prefer to bring the money by hand. Again, they note that face to face contact is a vital part of the exchange.
Thanks to everyone for their questions and feedback!
April 6th, 2009 at 11:46 am, Jennie ()
Hi, Olga.
This article is very interesting!
I am working on a project in one of my graduate classes. We are trying to recommend a marketing plan in which these mobile money transfer companies could use to communicate with Kenyans. Specifically we are looking at the product usage between Kenyans living abroad and sending money back home. Do you have any insights? How do you reach Kenyans living in remote areas to communicate the benefits of transfering money on their phone with family members miles away?
Thank you!
July 7th, 2009 at 4:28 pm, SMS Money Transfers with Africa’s M-PESA ()
[...] How does the M-PESA service benefit the average Kenyan? Olga Morawczynski, a PhD candidate at the University of Edinburgh who spoke at the GSM World Congress in Barcelona last February, shared the story of Martin, a shoe-maker in Kibera, an informal settlement just outside Nairobi. Martin makes about US$ 20 a day from his trade and sends a quarter of his earnings to his wife and mother, who live in Western Kenya, over 100 miles away. M-PESA saves Martin time, allowing him to work his trade instead of having to travel far outside his place of work to find a bank. The service also enables him to make frequent transfers – about 5 times a month – thereby allowing him to send a week’s earnings when his family needs the money most. Martin’s story as well as the results of Olga Morawczynski’s study can be found here. [...]
July 19th, 2009 at 7:52 am, Aline ()
very interesting article
are the experiences similar in other countries for such services like MTN Banking or orange money ?
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