By Antony Mutunga
In 2007, Kenyans were introduced to Safaricom’s M-Pesa, a mobile money platform that has since revolutionised the way of life for ordinary Kenyans. Initially, the platform was to be used as a platform for microfinance loans using mobile phones. However, after the pilot phase, after discovering that those who took the loans also sent the money to their families in rural areas, Safaricom decided to re-engineer their initial concept.
As a result, M-Pesa was revised to focus on remittances mobile money across the country. This was the beginning of a revolution. Through the years, as other mobile money platforms arose, this segment has been on the ascendancy – from sending and receiving money to making payments, saving and even being adopted by banks. Unlike most other economies, especially developed ones, Kenya bypassed reliance on debit and credit cards, to pioneer and advance mobile money. It was its biggest statement to cashless transactions.
In fact, in Kenya, according to the Communications Authority of Kenya (CA) third-quarter sector statistics report for the financial year 2018/2019, the number of M-Pesa active subscriptions stood at 26 million. In addition to a large subscription base, government and most other organisations have partnered with M-Pesa to minimise the use of physical cash. A ready example is the National Social Security Fund (NSSF), which prefers for its members to remit their contributions and other payments through M-Pesa.
The emergence of digital currencies has also played a role in advancing the cash-less wave. Cryptocurrencies such as Bitcoin, Ethereum and Litecoin have seen many Kenyans subscribe to this trend. Thanks to their decentralised nature and their rising value, swelling numbers continue to invest in virtual currencies.
Yet, despite this ‘going cashless’ craze in Kenya and Africa, physical cash seems to still be holding the forte as the most used form of exchange. And this is despite that fact that in the third quarter of the financial year 2018/2019, CA valued M-Pesa transactions at Sh2.1 trillion in Kenya.
Cash has retained its title due to several reasons, according to Josephat Mugo, an economics professor, the first being that it is the preferred and biggest mode of payment for wages.
“What do you expect when Kenya is mainly made up of the informal sector where ‘everyone’ is paid through cash? Even though cash is changed to virtual currency later, it starts out as physical cash,” Mugo says. According to FSD Kenya, only about 10 percent of people’s income is borne digitally..
According to Mugo, the maximum amount one can send as well as the daily transaction limit have also seen most people prefer cash when dealing with large amounts. For example, Safaricom’s M-Pesa allows one to send a maximum of Sh70,000 per transaction, with a daily cap of Sh140,000. This limits those who move bigger amounts.
Also, the government and a majority of organisations have failed, time and time again, to put up security measures that protect them from cyber criminals. As the nature of this crime continue to evolve, many do not invest commensurately to deter it. This has made many organisations a soft target for hackers. The result is that the more conscious amongst us have tended to shy away from digital transaction platforms for fear they may lose they might lose their money.
Another reason has to do with the charges placed on mobile money transactions. Because providers pass what are sometimes “unacceptable cost margins” to consumers, it deters those who are cost-conscious and those with low incomes households from transacting using mobile money. It also doesn’t help that government has resorted to over-taxing mobile money transactions because to tap into its “exponential growth”.
For instance, in the 2018/2019 national budget, Cabinet Secretary Henry Rotich increased excise duty from 10% as introduced in 2013 to 12%. The service providers transferred this burden to consumers.
Government policy is another hindrance. In 2015, the Central Bank of Kenya issued a notice linking virtual currencies to terrorism and money laundering due to the untraceable nature of their transactions. According to the governor, Patrick Njoroge, cryptocurrencies remained prone to theft, fraud, and other forms of crime that expose users to potential losses due to lack of backing by central banks or any physical assets. Even though some people continued to invest, a large number kept away as a result.
For Kenyans to adopt cashless transactions, policy must be tailored to encourage the trend. Government needs to find ways that advocate for a reduction in the charges of using mobile money services; it must cease its greed, pure and simple.
There is also need to incorporate digital technology in the informal sector to stop reliance on physical cash. Kenya has all the requirements to be the Sweden of Africa, but it must be deliberate about it. (
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