Mobile Telephony in Kenya … is it “Making life better”?

1. Mobile Telephony in Kenya… is it “Making life better”? Luca Manica Michele Vescovi ICT4SD course – May 2008

2. Outline • Introduction • ICT and Development Countries • Mobile Telephony in Kenya • M-PESA system • Conclusions

3. Why this Topic?

4. Report 2001 UNPD Human Development • direct links • Technology ↔ Social Development • Economic Growth • Quantifies the growth of the GNP • No information about how the GNP is distributed • No dependence from Social Development? NO Economic Growth  NO Resources for Education, Health, ect. BUT Economic Growth does not implies Social Development

5. BE OPTIMISTIC! New Technologies • ICT can give opportunities of Social Development: • better life conditions • new jobs • new opportunities of business • more information The ICT Role BUT ICT are not a magic WAND!

6. The Morana’s Mobile Phone Impact of the new technologies on the Kenyan culture Economic Impact • shame • look rich! Poverty Cultural Impact • lost of traditions • political choices Be like a White ICT make Mistakes

7. Kenya • 36 million: estimated population (Dec 2006) • 65% live in rural areas • more than 50% below the poverty line (1$/day or less) • 75% arid / semi-arid land(inhabited mainly by pastoralist communities)

8. Mobile Telephony • 20% geographical area covered(March 2007) • Coverage is still growing … • 70 - 80% population covered (March 2007) • Mobile penetration: ~ 30% = 11milion Kenyans • 98% prepaid traffic (per second billing)

9. Mobile Operators • Safaricom(1996) • ~ 9 milion subscribers • 40% Vodafone (U.K.) • Celtel(2000) • ~ 2 milion subscribers • 80% Celtel Int. (Kwait) • Econet Wireless ? • South African company • In legal battles since 2003 • Will it roll out within 2008 ? • Third licenced operator “The better option” “Making life better” “? ? ?”

10. Third operator ?

11. “Coverage” by Province # Safaricom’s Base Stations

12. Coverage by Operator • What is covered ? • Popul. / Business • Tourism • Main roads / links • … • Development of remote / crisis areas Safaricom Celtel

13. Mobile Network vs Fixed-line 2001:# mobile telephony subscriptionsovertaked# fixed telephony subscriptions Communication Commission of Kenya (CCK), report 2006/2007

14. Mobile market lacks • Actually a duopoly Safaricom / Celtel • Difficult to enter in the marked for the 3rd operator • Number portability not yet possible/deployed • Prices are still high: ~0.2€/min, ~0.05€/SMS • High taxes and duties: • 10% direct on mobile usage • 25% impact estimated on total costs • Handsets and activation cost still expensive • Electricity tariffs/availability to recharge batteries • walk for miles and use shops • solar panels, car batteries, generators, … (expensive tech.) • 0.4$ on average to recharge a full cellphone battery

15. Mobile banking • Mobile banking… a development opportunity? • 80% people unbankedin least developed countries (also in Kenya) • Barriers to banking services are: illiteracy, lack of education, high fees, proximity to bank facilties • Be unbanked means: cash economy, vulnerability to risks, hard save or borrow money • Need of transfer money: • bread-winner far from family, run a business, avoid risky travels • Popular way to transfer money in Kenya: • send it with a relative or friend (risky, slow, …) • use postal services (expensive commissions charged in %) • Even more adults own (or have access to) a mobile phone, also in rural areas

16. M-PESA (intro) • World’s first (2007) mobile bancking system • Vodafone/Safaricom + U.K. gov. initial support • Cellphone based platform for simple banking services and cash-transfers • On the Safaricom’s common SIM menu • SMS-based, (personal) PIN-protected • Kenya: banking infrastructure not well developed • Kenya: large network of air-time dealers, retailers, shops, oil pumps… candidate M-PESA agents • 1600 M-PESA agents, more than 500,000 customers

17. M-PESA (more details) • Customer: • M-PESA account distinct w.r.t. personal airtime credit • “Save” up to 50,000 Ksh (~500€) • Deposit and Send up to 35,000 Ksh per time • Free services: registration, deposit cash, buy airtime, withdraw cash by non M-P user • Charged service: withdraw cash by M-P. user, send to M-P. user (fixed), send to non M-P. user (variable) • Show balance, change PIN, languages: English or Swahili • Cash operations (deposit, withdraw) need an M-PESA agent • Low (directly charged) commissions w.r.t. banks (from 30 Ksh up to 400 Ksh) • All pooled balances held as a unique account (owned by Safaricom) in a Kenyan bank

18. M-PESA: Pros (4SD) • Reaches many more people w.r.t. Banks • To tranfer money is secure, faster, cheaper • Extends in time the availability of banking services (some are still agent dipendent) • Opportunity of employment, new business, develop. • Possible solution to the access issue for “unbanked”... helps to securely store incomes • Easy to use, even by illiterate • W.r.t. micro-credit it efficiently overcomes many structural / organizative issues

19. M-PESA: Cons • Further addiction to mobile phones and the operator • To deposit is free , to withdraw is charged, deposited amount doesn’t accrues interests... :-o (Is it “save money”?) • Cheap w.r.t. banks... but not so much in general (%50 population lives with less than 1$/day) • Enlarge the gap for whome cannot afford a cellphone + SIM + fees (Is M-PESA-sharing possible?) • W.r.t. Micro-credit: • No more face-to-face realtion to m-c agent and the m-c community • M-c agent is a “skilled”-economist, often an advisor for families and enterpreneurs ...is an M-PESA agent too? • In a development perspective m-c companieas reuse the deposited cash in local projects, loans for the local community... It is not the case of the M-PESA accounted capitals

20. M-PESA: Pros (4SV)(for Safaricom/Vodafone) • New “unmobiled” subscribers attracted by the service • Affiliation effect for M-PESA customers • Airtime credit can be easily/transparently bought • Direct incoming from services commissions • All pooled accounts accrue interests for Safaricom and can be further invested • World’ first service, actually limited to Kenya... a good pilot: • Vodafone plans to extend it to other countries (India, ...) and globally between countries • It would be the choice for the 500million $ in remittancies sent to Kenya by migrant (earn commissions) • It would be the choice for the 268billion $ remittancies worldwide (earn commissions)

21. Conclusions • No “Right or Wrong” in ICT • ICT can give opportunities of development • Systems developed in “western way” • Does ICT really change the situation?

22. What can we do? • Recognize the role of the Information • Customize the project on the context • Measure the actions on the needs of the population • Be optimistic

23. Thank you! Questions?