> Posted by Center Staff
The following is an excerpt from a private email conversation between two CFI staff members, Sergio Guzman (based in Washington, DC) and Leah Wardle (living abroad in Nairobi, Kenya).
Sergio writes:
Hey Leah —
I just read this article, which was tweeted by Tilman Ehrbeck at CGAP, about mobile money contributing to inflation in Kenya. The article claims that MPesa – especially since it has started allowing people to store money (creating something that looks an awful lot like a bank account) –causes Kenyans to move money around so fast that it sparks inflation.
I’m not a macroeconomist, but I’m interested to know what you think about it since you’re there.
Sergio
Leah responds:
Sergio,
I think inflation in Kenya probably comes from a lot of things, including government’s lack of fiscal discipline. In my humble opinion, it probably has little to do with MPesa. For an individual user, MPesa doesn’t create money, it just allows you to have it when you need it.
A few stats from my own experience, highlighting the miracle of MPesa:
- Time it took Steve and me to set up a joint bank account here: 15-20 hours. And we were working directly with the one of the branch managers, which is not the typical Kenyan’s situation.
- Time it took me to set up my MPesa account: less than 15 minutes.
- Percent of my daily financial transactions that require cash (or MPesa): at least 80.
- Percent of trips I make to the ATM and leave without cash because the system is down or out of cash: oh, maybe 40.
- Time it took to pay for our first safari using credit card: 1.5 hours (required to drive across town in traffic to pay at the tour office)
- Time it took to pay for our next safari with MPesa: 2 minutes (from our couch!)
- Things I’ve paid for with MPesa recently: employees’ wages, minutes for my phone, eggs, and car repairs
I’m just saying…
Thanks for circulating this article, Sergio.
Leah
Image Credit: openbook.co.ke
Have you read?
Time to Work Together? Corporations and NGOs have a ways to go with Mobile Financial Services
Mobile Money as a (Payment) Planning Tool
What Financial Diaries Reveal about M-PESA Use
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May 8, 2012 at 6:15 pm
Jack Gelvezon
Hi Leah,
Just joined the site. On mobile banking, what are the most common regulatory issues encountered in developing economies and how are they addressed?
Thanks.
Jack
May 10, 2012 at 2:14 pm
Sergio Guzmán
Dear Jack, I found this paper online which describes some of the common regulatory issues which you are inquiring about. I hope it is useful: http://www4.gsb.columbia.edu/null/download?&exclusive=filemgr.download&file_id=733510
You can also check this presentation out, on Slide 16 it contains some of the most salient regulatory challenges ahead. http://www.slideshare.net/mpayconnect/mobile-financial-services-for-the-next-billion-customers-mobile-payments-series
There was also a big event at the State Department that discussed this topic, you can see some of the basic conversations that took place there, by clicking here: http://www.state.gov/statecraft/tech/money/index.htm
May 11, 2012 at 10:17 am
Jack Gelvezon
Thanks Sergio. Most glad of your help.
May 14, 2012 at 4:52 am
leahwardle
Dear Jack,
Apologies for a late reply. CGAP also has some excellent resources on the regulation of mobile banking (and branchless banking more generally). Please see several that I’ve listed below.
Best,
Leah
Protecting branchless banking consumers: http://www.cgap.org/p/site/c/template.rc/1.9.47443/
The role of mobile operators in expanding access to finance:
http://www.cgap.org/p/site/c/template.rc/1.9.34485/
Regulatory framework for mobile payments systems in Nigeria: http://www.cgap.org/p/site/c/template.rc/1.1.5913/
India’s mobile banking guidelines- who wins, and who losses? http://technology.cgap.org/2008/10/08/indias-mobile-banking-guidelines-who-wins-and-who-loses/