Mobile money agents are the backbone of the mobile money industry, however, they face inherent liquidity management challenges in their daily operations.
Their inability to predict and respond to fluctuations in the demand for liquidity is a big challenge to their mobile money service business. They often end up lacking liquidity and consequently turning away customers.
Sometimes, they are forced to close their businesses when they have to devote time to rebalance. They have to take into account how long it takes to get to, and how much time they must wait at, their rebalancing point, which is usually a bank.
In a chat with Andrew Mutua, Founder and CEO of PesaKit, we learnt how PesaKit was created to empower every mobile money agent in Africa to become the source of affordable and convenient digital and financial services, so they and their communities can better grow and prosper.
Pesakit is a free business app in Kenya that allows users to become the go-to shop for affordable financial and digital services in their community.
It was developed to revolutionize last-mile access to financial services and digital commerce through mobile money agents.
We aim to build a network of mobile money agents in Africa who can serve as a distribution channel for a variety of digital financial services so that underserved populations across the continent have better access to the services they need.
As a regular user of M-Pesa, Andrew explained his frustrations at being unable to withdraw money due to his agent’s lack of flow.
According to him in multiple instances, he has been left in the lurch with incomplete transactions and this situation has occurred to him in times of emergencies.
While stating that in one of many incidents, he decided to try out a solution as it appears that if he is facing the situation, so many others like him will be battling such challenges.
Andrew then came up with the idea of focusing on the liquidity side of mobile money transactions, a journey he started by talking to some of these mobile money agents to find out if fluctuations in liquidity was their only challenge.
He found out that these mobile money agents are also idle during portions of the day, so their revenue is strictly concentrated.
“Bringing financial and digital inclusion to the last mile is imperative for a flourishing global economy. Financial institutions have been doing their part to make this a reality but they have struggled to build a reliable agent network and it is expensive to manage and supervise such an extensive network.”
Andrew found another opportunity to expand his original idea to leverage the mobile money agent network as a channel to provide these individuals with better access to digital financial services.
“Since our beta launch in November 2018, our platform has already empowered over 10,000 agents to make smart decisions on their day to day operations, resulting in a 20% increase in profits and productivity. We are also partnered with at least fourteen companies across the telecom, utilities and insurance industries.”
The state of mobile money in Africa
As explained by Andrew, mobile money has transformed the landscape of financial inclusion in emerging markets.
In Kenya for instance, where mobile money transaction volume constitutes nearly 50% of GDP, there are 231,292 mobile money agents (Jan 2020, Central Bank of Kenya), and a population of 53.4 million.
There is a mobile money agent for approximately every 231 people. These agents are able to reach large volumes of the population via a real human touchpoint, at a scale no other organizations can compete with.
Explaining further, Andrew said that despite the challenges, COVID-19 triggered a widespread shift in the adoption of digital tools.
More and more people are using mobile services out of necessity. Restrictions on movement and the potential risks of handling cash led consumers to quickly turn to digital payments as a safer and more accessible option.
“Access to mobile money has reduced poverty in Kenya, particularly among female-headed households. The rapid expansion of the mobile money industry has also successfully lifted many households out of extreme poverty as it allows its customers access to safe and reliable banking at a low cost.”, he added
How PesaKit works
To help mobile money agents better serve their customers and manage their own financial health, PesaKit provides money agents with working capital in the form of e-float via regulated Microfinance Institutions (MFIs) enabling them to serve more customers, increase their revenue and keep their businesses running.
“We also enable agents to access new revenue sources by providing them access to additional digital financial services through our app.
Agents can buy or sell airtime, KPLC tokens and Faiba bundles; pay utility bills and buy & sell microinsurance using the PesaKit platform and earn commissions on every sale or purchase.”, stated Andrew
Mobile money agents often struggle to adequately meet customer demands for withdrawals or deposits due to lack of cash on hand and/or e-float liquidity.
As such, they miss opportunities to earn commissions and to serve their customers. The PesaKit e-float loans enable them to serve more customers, increase their revenue and keep their businesses running.
“Mobile money agents are also idle during portions of the day, so PesaKit gives them opportunities to earn additional revenue.
The PesaKit app transforms mobile money agents into digital merchants, offering additional revenue sources through the sale of digital services (such as airtime and electricity tokens) and micro-insurance.
PesaKit improves income generation for agents as well as bolsters their resilience, all while improving access for end customers.”, he added
How technology has aided the delivery of financial services in Africa
According to Andrew, the digitization of financial services is an ongoing revolution as Sub-Saharan Africa has become the global leader in mobile money transfer services, leading the innovations on alternative financial solutions that improve financial inclusion.
“New technologies are being developed and implemented with the potential to change the competitive landscape in the financial sector.
Fintech is emerging as an engine of growth and a technological enabler that fosters financial inclusion and economic development.”
Explaining further Andrew said that fintech is one of the key drivers of growth in the region, as it creates an enabling environment that opens up the financial sector’s value chain and promotes efficiency gains.
“Across many countries in Africa, fintech is improving financial inclusion and stimulating innovation and productivity in major sectors, such as the small and medium-sized enterprises (SME) and agriculture which is the backbone of the region’s economy.”, he stressed
How can the proliferation of mobile money change the African economy
Mobile money is a digital payment platform that allows for the transfer of money between cellphone devices. Users can receive, withdraw, and send money without being connected to the formal banking system.
However, as explained by Andrew this is not similar to mobile banking wherein users connect to their bank accounts using their device to make financial transactions.
Mobile money has become a revolutionary tool for expanding access to financial services in low resource environments especially in Sub-Saharan Africa.
With just a mobile phone, users are able to quickly transfer money at a low cost and, typically, without needing access to an existing banking account.
“Sub-Saharan Africa has experienced the most growth, with mobile money deployments increasing 39% annually over the past decade, and both transaction volume and value seeing double-digit growth.”
Andrew stated that mobile money has the capability to increase financial inclusion and can facilitate higher savings for households, therefore making them more resilient.
Research also shows us that mobile money has the power to give women in male-headed households, who are also usually secondary income earners, more financial independence.
“Mobile money is also a key enabler of e-commerce payments, e-commerce has helped digitize retail businesses in Africa creating millions of jobs.”, he concluded
Featured Image: Andrew Mutua, Founder and CEO, PesaKit
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