In March 2012, M-PESA, a mobile phone based electronic money transfer and payments service marked five years since its commercial launch in Kenya by Safaricom, the leading mobile phone service provider in Kenya.
It is no secret that one of the main functions of mobile money agents such as those in partnership with Safaricom is to perform cash-in/cash-out transactions which cannot be executed without sufficient reserves of both -e-money and cash at the agent outlets. E-money liquidity and cash liquidity are therefore key areas of concern in a mobile money deployment.
With the transfer of the M-PESA Agent Administrations functions mid-year last year from the New Products Division to the Consumer Business Unit that previously primarily handled airtime distribution, and a shift in agent recruitment policy that saw an upsurge in new M-PESA agent outlets spread across all channels, Safaricom has found it increasingly challenging to enforce the set liquidity thresholds across the agent network.
In the last two weeks, out of the 37,000 agent outlets, more than 7,000 had been suspended by Safaricom where the affected agents were perennially holding e-value of KSh10,000 (US$120) or less. The M-PESA system has a means of automatically freezing an agent’s till. It was not uncommon for an M-PESA customer wanting to do a cash-in transaction of Ksh20,000 (US$240) to visit four or more agent outlets and make deposits in small bits in order to get the desired e-value, making a painful experience of an otherwise great service.
With the accepted e-value holding being Ksh30,000 (US$360), agent’s would at times refuse to perform a cash-in transaction when their e-value holding got depleted to this threshold for fear of being penalized through closure, making e-value even more scarce, a sizable amount being the total sum of the reserves protected by agents to forestall not being utilized.
Banks could perhaps free the middle class and banked M-PESA customers from the aforementioned liquidity trap, since a customer directly obtains electronic value from their bank account and into their M-PESA account without having to visit an agent outlet. There are currently over 25 banks that have partnered with Safaricom to have customers transfer money between their bank and M-PESA accounts.
The current 14.5 million M-PESA customers translate to an average of 390 customers per agent, a significant drop from 625 customers per agent in 2009 and 2010 at the peak of M-PESA agency profitability, and when agents were self-propelled towards being well stocked.