Kenya has made good economic strides, thanks to mobile money.
M-PESA – a successful mobile money technology
In Kenya, M-PESA is the most commonly utilised electronic money service allowing users to send money to any cell phone owner via SMS messages. Cash can be transferred into M-PESA deposits and vice versa via specialised agents, which are widespread across the country.
After being introduced in 2007 by Safaricom, mobile money usage has grown rapidly. As of December 2014, the number of total M-PESA agent outlets reached 124,000 and the number of customers 25 million (out of a total population of 45 million).
During 2013, 282.5 million transactions were conducted in total, and the total value of money transferred was 1.9 million Kenyan shillings (US$22 billion) – equivalent to 40% of Kenyan GDP in 2013.
There are many reasons for this rapid growth and success of M-PESA, including the dominant market position of Safaricom, the aggressive marketing and expansion campaign in the early days, and the need for payment services for families with members often spread across the country.
Data
In this study we use the Kenya FinAccess Business Survey 2014, designed by the Financial Sector Deepening Trust Kenya (FSD-K) together with Tilburg University. It includes novel business mobile money usage questions. The survey data were collected in 2014 by FSD-K from a representative cross-section of 1,047 mainly small and medium enterprises in Nairobi.
Using a formal regression analysis we explore which businesses are more likely to use M-PESA when buying supplies.
- The estimate shows that, ceteris paribus, businesses that purchase supplies on credit are 17 percentage points more likely to use M-PESA when purchasing inputs.
It is important to note that these estimates do not imply any causality, but rather the result may imply that having a trade credit relationship leads to mobile money usage between businesses and/or using mobile money facilitates credit relationships between businesses. Figure 1 illustrates this relationship.
