Mobile money agents in Kenya make the lowest profit among the three largest economies of East Africa, causing a number of them to plan to exit the market in the next 12 months, a new survey shows.
The survey, which was launched Thursday, shows that on average a Kenyan agent makes Sh6,160 ($70) a month compared to Sh6,864 made by an agent in Uganda and Sh8,360 profit in Tanzania.
The research also reveals that Kenyan agents generate the largest number of transactions in the region. It attributes the lower profit margins to intense competition as more mobile money outlets continue to spring up across the country.
“With new agents consistently joining the market, competition is having a negative impact on profits and driving existing agents in having to expand their business outside digital finance to supplement their income,” said the researchers.
The survey showed that while 17 per cent of the agents were not profitable, only 58 per cent said they would be still be operating in a year’s time.
The research was conducted by The Helix Institute of Digital Finance in a collaborative venture between the Bill & Melinda Gates Foundation and India-based financial consulting NGO, MicroSave, which also has a presence in Nairobi.
Kenya is among eight African and Asian countries participating in the research. The countries were selected for their contribution to the development of digital financial services globally.
The other African countries surveyed in the four-year project include Uganda, Tanzania and Nigeria. In Asia, the countries to be surveyed are India, Indonesia, Bangladesh and Pakistan. Mike McCaffrey, head of digital finance at Helix Finance, said the problem of profitability only existed in Kenya.
“When we asked some of agents about their profitability situation, they said they had stopped being dedicated mobile money providers and had diversified into other areas in order to continue being profitable,” said McCaffrey.
The Helix Finance report is based on over 2,000 agent surveys carried out at the end of 2013 all over the country.
The inability to have a proper business case for the mobile money business in Kenya has also been noted by digital technology researchers, Dr Tonny Omwansa and Prof Timothy Waema in a working paper titled “Deepening financial inclusion through collaboration”, which was recently published by the Kenya Bankers Association.
“The mobile money channel and the agent network provide the best avenue so far for reaching the very poor, but the business case for serving this segment of the market has not been well developed to incentivise the main players to be actively involved,” the scholars said.
In the past few years, the number of M-Pesa and Airtel Money outlets have risen as businesspeople try to take advantage of people’s need to transfer cash and pay for services without having to travel long distances or carry cash when making transactions.
Data from the Central Bank of Kenya shows that as at the end of February this year, there were 115,015 agents for mobile payments in Kenya serving 26.1 million customers. In the same month last year, there were 88,393 agents with 21.8 million customers.
During the same month, 65.6 million transactions worth Sh172.8 million were done compared to 67.1 million transaction worth Sh178.5 million in January.