Mobile Money Usage Patterns of Kenyan Small and Medium Enterprises

Some people expect to see small and medium enterprises (SMEs) benefit substantially from using mobile money (MM). SMEs are often seen to process large numbers of payments and can have a surprising amount of money flowing through them. At the same time, their need for payment and transactional services are not always well served by traditional banks. They do not always find it easy or cost effective to adopt a full-featured package of banking services as a larger business might. Anecdotal evidence seems to confirm that many small businesses use MM intensively in markets where it is available; however, the phenomenon is not well documented or researched. In response, in late 2011, we conducted a survey of 865 SMEs in Kenya to better understand MM adoption patterns in one of the most active markets in the world.

We found that whether Kenyan SME owners use MM to pay utility bills or salaries or suppliers, they are driving higher volumes of both MM adoption and transactions. Our data show that of the 865 SME owners who responded, 861 (99.5%) used MM in their personal or business dealings, and 67% used it for business. SMEs are intensive users compared to consumers; 80% report using MM once per week or more, whereas the average usage in Kenya is closer to twice a month. SMEs also appear to promote viral adoption along the supply chain; many say they adopted it because clients or suppliers asked them to. For these reasons SMEs should be a critical market segment for mobile network operators who seek to make MM usage pervasive across the value chain from consumers, to merchants, to suppliers.

We also found that while MM use by SMS is widespread, it is not yet deep and SMEs are not yet “closing the e-loop.” Most SMEs use MM on a one-off basis and do not actively promote MM at the point of sale. In particular, SMEs are not yet closing the e-loop by receiving large volumes of retail transactions electronically and then paying out to employees in electronic value – both retail transactions and wage payments were predominantly cash. We did find that 28% reported accepting MM retail payments, a figure we found higher than expected given the high pricing of transactions and lack of a convenient interface. Enticing SMEs and other businesses to close the loop will be a major part of the endgame for MM operators who hope to move toward a cash-light world.¹

Finally, our survey found several barriers that have prevented people from using MM. Specifically, respondents cited high tariffs and inadequate access to record-keeping and payment-management interfaces as main barriers to adoption. In order to make MM ubiquitous, MM providers and their partners will need to keep an eye on cost and convenience and offer value-added services beyond the transaction.

Context

Three recent studies document how MSMEs (micro, small, and medium enterprises) are using MM, but the data sets are limited.² In general, this work shows that MSMEs are using MM more intensively than regular consumers, but it also shows that MSMEs are not “going digital” and using MM extensively for a large percentage of their business transactions.

One study of users of MTN MM in and around Kampala, Uganda, was conducted in 2009 by Ali Ndiwalana, Olga Morawczynski, and Oliver Popov.³ They did not set out to investigate business users, but when they asked their survey respondents what they were using MM for, aside from airtime purchases, they found that nearly 33% of transactions were to purchase or sell goods or services, while the remaining two thirds were for money transfers. Larger formal businesses in Uganda do not usually accept MTN MM as a means of payment, so it’s likely that most of these purchases and sales transactions were conducted by entrepreneurial individuals or small businesses on one side or the other. This is a significant level of usage, given that MM has never been marketed for retail or business payments. It speaks to the...