How Mpesa Changed The Financial Sector In Kenya

M-pesa is a cutting-edge system that allows users to transfer funds between their virtual wallets and their SIM cards. M-pesa is more than just a new way to send money; it also provides a banking service and financing options for millions of Kenyans.

There were around 50 million M-pesa users as of the end of 2021. M-pesa’s 111% penetration rate is particularly impressive when considering Kenya’s population of 45 million. Every citizen of Kenya has their own M-pesa number.

The Business Strategy of M-Pesa

The m-pesa business model is structured in a pyramidal hierarchy. The top tier consists of the banks that process the bulk cash transactions for the authorized agents. Here, deals can be worth millions of Kenyan Shillings.

The bank-facing dealers are located on the ground floor. Multiple registered agents can work under a single dealer. He acts as the ‘banker’ for the agents. Agents can be found all over, and they handle thousands of transactions every day. The subagents’ equivalent of a bank. Subagents are the lowest-level employees who have direct customer contact.

Sub-agent transactions are conducted in 50 shilling increments or higher. The customer’s cash deposits and withdrawals will both be handled in cash by the subagent.

The Social Effects of M-Pesa

Many Kenyans did not have bank accounts and instead kept their money in safer places like their homes before the introduction of M-pesa. The introduction of M-pesa has altered this in the following ways:

1. M-Pesa Is a Convenient and Secure Way to Keep Your Money

You can store your money in a digital wallet instead of carrying around physical bills. Paper currency, in particular, is difficult to store since it degrades from exposure to the elements over time.

2. With M-Pesa, money transfers are now secure and convenient.

It is quite simple to move money from one m-pesa wallet to another, and daily transfers of several hundred thousand shillings are possible. Financial institutions have jumped on board, linking customers’ bank accounts to m-pesa so that money may be transferred back and forth between the two.

3. Through M-Pesa, Savings Have Been Mobilized

The ability to save money and even lock that money away for a set period of time within the M-pesa wallet has completely transformed the way Kenyans mobilize their savings. Tools like m-shwari and KCB M-pesa make this a reality.

4. With M-Pesa, a cashless payment system is now feasible.

Kenyans use the M-pesa system, while Americans use credit cards. A seller can accept payments using M-pesa once they have signed up for an account and been assigned a unique identity. Till numbers and paybill numbers are the names for the corresponding accounts. Everyone from the man selling vegetables to the doctor to the federal government can use the payment system.

5. The Unbanked Can Now Use Banking Services Thanks to M-Pesa.

M-pesa has made it much easier for Kenyans, especially women, to participate in the country’s formal financial system. Using an M-pesa account requires zero specialized knowledge. As long as no transactions are made, your m-pesa account and registration are free.

The fees for making smaller purchases are so minimal or perhaps nonexistent that even the poorest people may pay them. If you want to give someone 100 Kenyan Shillings, for instance, you won’t have to pay anything.

Fuliza and similar mobile loan services have expanded people’s access to credit. Owners of small enterprises have seen increased profits as a result of their efforts to expand their operations.

6. Social Unifying Tool

Besides, the financial part of m-pesa has become a sturdy foundation that has joined society and strangers and let individuals pool together their resources for a noble reason, such as raising money for medical bills, burial costs, wedding costs, etc.

Monopolistic Tendencies Of Safaricom M-Pesa

The extent to which M-pesa has cornered the market on money transfers and other payment services has been hotly contested.

Without a shadow of a doubt, m-pesa controls 98.69% of the market share. Safaricom has been accused of locking in M-pesa customers to its network, which has come at a cost.

Sending 1,000 Shillings to a registered m-pesa user costs 12 Shillings, whereas sending the same amount to a non-Safaricom M-pesa user costs 49 Shillings.

There have been multiple attempts to introduce legislation to the parliament that would break up M-pesa, but none have been successful.

Conclusion

M-pesa is without a doubt a groundbreaking idea, and the effects that it has had and will continue to have on society will be felt for many years to come. M-pesa has given those who previously lacked access to banking services and allowed them to benefit from the advantages of innovation in society.