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M-Pesa has lifted 850,000 out of poverty

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Safaricom’s mobile money platform M-PESA has lifted 194,000 households or 850,000 individuals out of poverty in its 10 years of existence, according to a report published in a widely respected academic journal. The Science journal reports that the impact, which is more pronounced for female-headed households, appear to be driven by changes in financial behaviour – in particular, increased financial resilience and saving – and labour market outcomes, such as occupational choice, especially for women, who have moved out of agriculture and into business.

“Nearly 10 years after its launch, mobile money is ubiquitous in Kenya. It is used by at least one individual in 96% of Kenyan households,” says the article published in the journal. Science, also widely referred to as Science Magazine, is the peer-reviewed academic journal of the American Association for the Advancement of Science (AAAS) and one of the world’s top academic journals.

It underscores the importance of M-PESA, which is one of the key drivers of the economy – painstakingly built, block by block, by Safaricom since it was launched in 2007. The journal says that women have benefited tremendously from the platform.

Presently, M-PESA users have access to 110,000 agents who provide deposit and withdrawal services. By contrast Kenya has only 2,700 automatic teller machines (ATMs). The agency network has been an essential factor in the success of M-PESA, says the researchers.

SEE ALSO >> How Safaricom is creating Kenyan millionaires daily

Safaricom recently launched its Sustainability and True Value Reports (prepared by audit firm KPMG) which show that the telco’s impact on the Kenyan economy – taking into account both economic value generated and tax paid – amounts to KSh249 billion. Safaricom reported that if the wider effects on the economy are included, this number increases to KSh383 billion, approximately 6 percent of Kenya’s Gross Domestic Product (GDP).

The figure is arrived out through a methodology applied by audit firm KPMG, which says the greatest contribution to Social Value is M-PESA. The social value created by M-PESA in the financial year 2016, excluding transaction fees, has been calculated at KSh184.5 billion. This is 4.45 times the total amount of transaction fees earned by Safaricom in the same period.

“Our M-PESA mobile money transfer product, for instance, has become a platform for a range of services that are improving livelihoods,” says Safaricom chairman Nicholas Nganga. “As well as providing first time access to the internet for many Kenyans, we continue to build on our work in areas such as agriculture, education and health, where technology is recognised as a critical tool that can make a significant difference to people’s lives.”

Deepening M-Pesa benefits

The company says that it is in discussions with five companies as it seeks more comprehensive interoperability for its mobile money platform M-PESA – a strategy about how to further deepen the benefits of the platform. The operator says it is looking at closing the process with the five firms it did not name in the next one year as it seeks more ways of deepening financial inclusion in the country. “We see this as a natural progression given the growing uptake of mobile money in the economy. We plan to close on this process within the next 12 months,” Safaricom CEO Bob Collymore said in a statement.

Mobile money has become ubiquitous and is used by over 90% of households.

Currently, several operators in the technology space already have in place comprehensive infrastructure sharing agreements which have been negotiated according to mutual benefit and commercial needs of each operator. Safaricom currently shares infrastructure with Airtel, Telkom Kenya, Multichoice, KWS, KBC, Wananchi, JTL, PANG, Liquid Telecom and Access Kenya among others. Safaricom has invested heavily in network expansion over the, far eclipsing its nearest competitors.

“It is important to note that M-PESA has achieved its current market position after nearly ten years of sustained investment in building the required technologies and agent networks to ensure that it remains relevant to the market needs,” said the telco.

The firm says it has consistently invested between Ksh28 billion and Ksh30 billion annually over the last four years to expand its network, perform necessary network upgrades and to create a strong partner ecosystem which currently covers over 150,000 Kenyan businesses, allowing over 845,000 individuals to remain employed.

“The mobile money market is fiercely competitive and we have been pleased to see the segment continue to grow for all operators, including new entrants. Already, mobile money operators not only in Kenya, but also across the region, have established interoperability agreements for mobile money, including sharing of agent networks, and enabling transactions between systems. We believe that any operator who wants to succeed in this market must commit to investing in a compelling product for their customers,” said the firm.

READ ALSO >>  Safaricom CEO wins key step in fight with blogger

Presently, the firm is expanding its 4G network aimed at bringing faster and more efficient internet connections to its 25 million subscribers and is also investing in fibre optic cables in its effort to bridge the digital divide. Safaricom has so far invested in 11,000 kilometers of cable.

There have been suggestions and proposals that the government should intervene in Safaricom’s lead over the competition but analysts say this will set a bad precedent and deter potential investors. “We support the view of economists and market analysts who have pointed to the fact that in order to sustain its economic ambitions, Kenya needs more to create five companies the size of Safaricom every year to sustain its growth,” the telco said.

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