The Rise of Mobile Mobile and Mobile Savings in Kenya

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1 The Rise of Mobile Mobile and Mobile Savings in Kenya Gabriel Demombynes World Bank - Nairobi World Bank Group

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3 The Big Picture on Mobile Money Are Mobile Savings Tools Reaching the Poor?

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6 How Does Mobile Money Work?

7 More than 15 million mobile money customers at end of 2010

8 25% 20% 15% Value of person-to-person transactions alone exceeds 20% of GDP Monthly Value of Person-to-Person Transfers as % of GDP Trend with Forecast 10% 5% 0%

9 Mobile money transfers usage is highest among urban Kenyans

10 Men are more likely to use mobile money for transfers than women 73% 64% Men Women

11 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mobile money usage for transfers is highest among those aged

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13 What Does Mobile Money Do? Reduces costs of 1) Money transfers across distance 2) Money storage

14 Possible Welfare impacts of lower cost of transfers Lower cost payments, including remittances Higher level, better timing of remittances Increased & more efficient investment in rural areas

15 Mobile money transfers have transformed the remittances industry in Kenya Other Cheque Direct into bank Western Union, etc. Post office Bus/matatu Friend/family Mobile money 0% 10% 20% 30% 40% 50% 60% 70%

16 Remittances are largely wealth transfers from wealthier urban areas to rural areas Billions of Kenyan Shillings Deposits Withdrawals Richest 2nd Richest Middle 2nd Poorest Poorest Unknown Quintile

17 Have increased remittances helped? Qualitative evidence Mbiti and Weil (2011): mild evidence of increased farm employment in areas with widespread mobile money adoption Area of future research!

18 Are Mobile Savings Tools Reaching the Poor?

19 Types of Savings Products Savings Accounts Bank account, SACCO, ROSCA Mobile Money M-PESA, YuCash, ZAP Bank-integrated mobile savings M-KESHO, KCB Connect, Pesa Pap Interest on savings Deposit insurance Security Liquidity, dependent on branch location Highly regulated Loans Insurance Payment and transfer system Liquidity Payment and transfer system Security Interest on savings Security Liquidity Loans Insurance Payment and transfer system

20 ¾ of Kenyan households own mobile phone Only 39 percent of Kenyan adults have a deposit account mobile phone networks offer the potential to reach a large number of unbanked individuals.

21 Measuring savings in 2010 survey Do you save any portion of your income? with M-KESHO, etc with M-PESA? Bank-integrated mobile savings M-PESA savings How much on average do you retain on your M-PESA account? Positive M-PESA balances ALL DATA ON SAVINGS ARE ONLY FOR THOSE WHO USE M-PESA

22 Reported mobile savings among M-PESA users Bank-integrated mobile savings 6% M-PESA savings 37% Positive M-PESA balances 74% 0% 10%20%30%40%50%60%70%80%

23 Reported mobile savings by quintile among M-PESA users Wealthiest quintile 4th quintile Middle quintile Bank-integrated mobile savings M-PESA savings 2nd quintile Positive M-PESA balances Poorest quintile 0% 20% 40% 60% 80% 100%

24 For emergencies For meeting day-to-day household needs For later use in life/old age For personal reasons (clothes, travel) For my education and that of my children For expanding an existing business For starting up a new business For agricultural inputs (seeds, fertilizer) To purchase land To purchase or build a house for my family For improving a house Security Avoid misuse of money To leave something for my children For social reasons (wedding, bride price) For purchasing a car or motorcycle To help other family members Buy a new phone Easily get loan Why do people save? (M-PESA savers) 0% 10% 20% 30% 40% 50% 60% 70% 80% Only M-PESA M-Pesa + other accounts

25 Bottom line (1) Much hyped bank-integrated mobile savings products like M-KESHO have not achieved wide use, and almost none among poor BUT, simple savings using mobile money is very common

26 Bottom line (2) * We can t show that M-PESA increases savings BUT * High-use of M-PESA among all Kenyans especially urban poor AND * Large majority of M-PESA users including those in poorest fifth keep positive balances and many report M-PESA savings

27 Future attractions Impact evaluation of M-PESA based water payment system (joint with Billy Jack and Tavneet Suri) National survey via mobile phone and with incentives paid via airtime /mobile money (joint with local partners)

28 Thank You

29 Possible effects of mobile money that could increase growth More efficient allocation of human and physical capital Improved risk sharing more efficient investment Increased savings

30 Person-to-person transfers are dominant use of mobile money Receive money 88% Send money 74% Buy airtime 41% Save money 26% Buy when travelling 17% Make donations Receive customer payments Buy goods/services ATM withdrawals Pay bills Receive salaries/wages Pay salaries/wages 5% 5% 3% 3% 2% 2% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

31 How do we measure/define savings? Income > consumption Typology: Short-term safekeeping Medium-term accumulation to purchase asset or cushion shocks Long-term accumulation for retirement