“I propose we change the thinking here – M-Pesa and equivalent systems may not provide the type and range of financial services needed by the poor, but they do provide an excellent vehicle for helping delivering these services”

I absolutely agree with this point. I am not suggesting that M-PESA become a bank or MFI. I am simply suggesting that they work with these institutions and offer a link between the poor user and formal financial services.

“As a strong supporter of mobile deposits and micro-loans, I share this view. However, we need to understand the challenges to make it a reality. We are asking mobile operators to become bankers.”

No, we are just asking mobile operators to figure out ways in which they can work with banks.

“CBA is not the Central Bank of Africa but a retail bank called Commercial Bank of Africa”

You are absolutely correct! This was a mistake on my part.

“MPesa don’t get the interest (or treasury income) on funds as the money is not theirs (it is the user’s money) and so the money is held in a Trust account on behalf of the user. In fact the bank keeps the Trust account interest!!”.

The point here is that poor Kenyans should be reaping the benefits of their limited savings, and not large institutions. We just need to strategize and figure out the best way in which this can be done.

“Some also made clear that M-PESA was actually safer than the banks. Given the history of bank crashes in the country, this is no surprise”” is not really accurate any more. Kenyan banking is now acclaimed as being as robust as European / US banking systems.”

Yes, I also agree with this point. However, there was a distrust of banks amongst many of my informants especially the poorest. These bank crashes were not easily forgotten. As a result, numerous informants would spread out their savings to decrease the risk of loss—putting some cash in their home bank, some in the bank, and the rest in M-PESA.

I think most of us agree that mobilizing savings via the mobile phone is no easy task. But I like the suggestion put forth by Shaun, “The big market opportunity is tying this whole thing together in one seamless independent national ecosystem”. This way, bankers do not have to become banks, or vice versa. They just need to work together and figure out how best to serve the needs of their poor users. This is certainly a challenge that this industry will soon need to address. The main thing I want to do here is highlight the need for this type of service.

Focus should (and is at CARE) move to the provision of tools to allow the financial services providers to quickly and easily accept and make payments via existing mobile payments networks. In this way, the “last mile” cash movement is handled by the MNO and their agent networks, but the providers of savings, insurance and credit in these markets get the opportunity to change their business model, reaching more clients at a lower per transaction cost.

Jerome de Mallmann

Interests from global MPesa account would be shared between Safaricom, Suppliers and the Users…. with such low balances per account is, one can wonder how many users would get out of poverty from such interests.

An idea would be that SF, transparently uses, those interests to fund high impact local projects (schools, water supply, lighting for rural areas, …).

Ultimately, MPesa users may submit their best ideas/wishes/issues, and vote for the few selected projects to be funded. Some “Tontines” have a similar approach.
In general, I am a strong supporter of Group Savings (rather than individual low balance savings). This allows to raise enough funds and go after significants projects for the common group benefits.

I guess Agents/Business Accounts should get interests (against management/maintenance fees ..)

CBA is not the Central Bank of Africa but a retail bank called Commercial Bank of Africa. MPesa don’t get the interest (or treasury income) on funds as the money is not theirs (it is the user’s money) and so the money is held in a Trust account on behalf of the user. In fact the bank keeps the Trust account interest!! There is always a perception that mPesa or Zap make a fortune from interest and treasury – they don’t as this is not allowed. Now it may be allowed in the future is mPesa or Zap (for example) were to match deposited funds and capitalize to such a degree that they would be trading treasury funds as a minority % of actual matched deposits. it is a question of risk management and this policy is controlled by the central bank.

To enable payment of interest mPesa would need to do what our new Kenyan project Mobikash (+ Zain to some extent) have done – fully, seamlessly link a savings, loan or cheque account to the SVA (with MFIs, banks) , or apply to the regulator for a deposit taking licence, or buy a bank outright. Both of the latter options are expensive.

mPesa do allow money to be transfered to MFIs in a crude manner in Kenya and Tanzania and have done for some time now. However, it is not slick and slow to clear (2 days). Our projects are delivering SVA to account transfers as fast as RTGS.

The big market opportunity is tying this whole thing together in one seamless independent national ecosystem – exactly what we are working on across Africa with 4 – 5 major regional rollouts.

I have a few workds to say on this one “”If the network goes down, or the agent is out of float, customers cannot access their cash.”" Well, the fact is that mPesa does go down and customers are indeed left stranded without access to their money, or recipients waiting for money that doesnt arrive. Sadly MPesa is well known for being out of service (3 whole days in July) and it is a topic of widespread concern (re trust) amonst the wananchi and the press. This is not sustainable. mPesa is a great product – no question, but they will never attain a banking standard operation based on their reliability track recored. Imagine if Citi or Barclays was completely down for 3 whole days, everywhere! There would be a regulatory clamp down and battle of mammoth proportions.

Another point of perception that caught my eye is – “”Some also made clear that M-PESA was actually safer than the banks. Given the history of bank crashes in the country, this is no surprise”" is not really accurate any more. Kenyan banking is now acclaimed as being as robust as European / US banking systems. In fact there was an article in the news last week by the World Bank I think saying that the standard of management and control in Kenya is world class. But, mPesa money is stored in trust by at least 4 Kenyan banks, not in mPesa’s pocket, so there is a misconception here. Significantly more chance every day of mPesa system problems (see above) than a bank failing and losing your cash. The government won’t allow that to happen.

Your last point is exactly what we are doing across Africa – tying all this together, offering intrerest on money in mCommerce ecosystems and a whole lot more than the MNOs offer, because we can focus, move fast, offer niche solutions to stakeholders and operate independently of MNOs and banks etc = a great advantage going forward.

“” If this is the case, then it could be a while before we see the mobilisation of savings via the mobile. This is unfortunate.”" – we and our clients are already in this space and about to go public on these services.

How is Edinburgh? When are you next in Kenya?

Cheers, Shaun

Safaricom has done a splendid job by creating an ecosystem which seems self sustaining. In creation of such access infrastructure there are definitive initial & recurring costs involved.

At the same time if for a minimal incremental cost ( choice can be given to customers) or if the existing buss model allows interest to be paid to customers then it would be wise on the part of safaricom to look at the long term benefits of paying interest than short term gains.

Additional Cutomer acquisition numbers and retention will help justify the outflow.

All in all one thing is clear Technology is making lives much easier to all in some or the other way. Appreciate this discussion and enlightening us. thanks

For Safaricom to move into offering savings accounts and then loans etc comes across as being a little reckless unless they fully understand the bank’s collective reluctance to meet this market demand. This could be a simple case of the banks inability to service this market cost effectively.

I can hear people saying that banks are conservative, lazy, unadventurous, have no interest in their customers etc etc. But we have seen many disasters or near disasters when the financial sector has become more entrepreneurial, willing to take risks. The current credit crisis is a long way from Kenya but it is an example of what can happen.

The answer may be that the Kenya regulators need to define a type of banking institution, which is specifically structured to meet this market segment. Built around an extended M-Pesa service with regulations and mechanisms for prudential supervision that save guard the interests, (money) of the customer base. We have seen in other countries such institutions, as community trusts that service the banking needs of a community. These organizations are normally closer to their customers, more flexible in their thinking and operate off a lower cost base.

M-Pesa is proving not to be an end in itself, but a starting point on what will be a long journey. I hope somebody has mapped out the journey.