Mile Wide, Inch Deep: The Uses of E-Money Among Low-Income Kenyans

Exploring new markets for e-money

This brief is based on a study "Cash In, Cash Out Kenya: The Role of M-PESA in the Lives of Low-Income People" published by Microfinance Opportunities (MFO). The study examines Kenya’s use of M-PESA, the country’s mobile phone enabled money transfer service using the Financial Diaries methodology.

Respondents in the MFO study reported the purpose of each e-money transaction and each cash transaction. MFO then used spatial analysis to calculate the distance that M-PESA travelled. Findings include:

  • Cash is still “king” for both household and business transactions;
  • Use of cash is highly localized;
  • Business transactions dominate household transactions by value;
  • E-money is a small part of the overall economy;
  • E-money travels much longer distances than does cash;
  • M-PESA e-money transactions are more likely to be household transactions;
  • Median e-money business transaction was much larger than the median e-money household transaction, resulting in a lower fee rate for the former.

The study suggests that e-money providers could experiment with different business models that will facilitate uptake among business-related market segments, for e-money to grow. E-money has a genuine market opportunity to serve the business community provided that the issues related to trust and cost structure can be resolved.

About this Publication

By Stuart, G. & Cohen, M.