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Remittance Markets in Africa
Box 6.1
The M-PESA Money Transfer System Kenya is the first country in Africa to use M-PESA—a Safaricom service (in partnership with Vodafone) that provides a fast, safe, and affordable way to transfer money by mobile phone. Through M-PESA, one can deposit, withdraw, or transfer (send) money; buy Safaricom prepaid airtime; or pay utility bills. The high number of Safaricom airtime subscribers gives M-PESA a wide network, with more than 14,000 agents countrywide and 10 million customers. M-PESA is a domestic money transfer system operating only within Kenya. Customers choose M-PESA because it is convenient, efficient, fast, and cheap and provides a 100 percent guarantee that the money will be delivered. M-PESA customers can transfer money to any other network and can send money to or receive money from (unlike other means of money transfer) any part of the country 24 hours a day. They can also keep money in their phones and withdraw it, send it, or pay bills at their convenience. An explanation of M-PESA operations must begin with its national network of about 14,000 agents, who register customers and process cash deposits and withdrawals on their behalf.a All agents have an existing business—for example, selling groceries, Safaricom airtime, or fuel—so they already deal in cash. They purchase a mobile money (e-money) float from M-PESA with a cash deposit. They also maintain a real cash float. As cash-in/cash-out points, from the customer’s standpoint, the agents function much like human automated teller machines (ATMs). As they buy and sell this e-money, they earn a commission for each customer transaction. M-PESA customers can send up to K Sh 35,000 per transaction and keep up to K Sh 50,000 in a virtual account. There is no minimum balance required, no monthly fees, and no hidden charges. The maximum account balance is 50,000 K Sh, and the maximum daily transaction is 70,000 K Sh. An M-PESA money transfer involves these basic steps: 1. If not already registered, a customer can register for free at any M-PESA agent. Nonregistered customers may receive but cannot send money unless the agents allow them to use their account; MPESA is only for Safaricom customers at the moment. Although customers may deposit funds in an M-PESA account for free, registered customers pay lower withdrawal fees. All one needs to register is a Safaricom SIM card, a mobile telephone, and an original ID or passport. 2. The sender hands funds to an attendant at an M-PESA agent (including either Safaricom dealers or other registered businesses such as gas stations, (continued)