Bridges to Cash: The Retail End of M-PESA

This paper attempts to understand the liquidity management needs of M-PESA stores in Western Kenya. It examines daily transactional data from twenty M-PESA stores. It supplements this data with interviews of staff of PEP Intermedius, M-PESA store owners and staff, and M-PESA clients.

M-PESA is a mobile money service promoted by Safaricom, the leading mobile operator in Kenya. Users are able to send money to each other conveniently from their M-PESA using only their mobile phones. A key to M-PESA’s success is the availability of an extensive network of retail shops that accept M-PESA deposits and withdrawals. They provide liquidity to the system, and are paid a commission by M-PESA for their service. These stores are backed by a network of intermediaries that arrange the logistics around cash management.

The paper examines how liquidity needs vary by location and day of week and by the level of service that the store offers. Findings indicate that:

• Stores require intense daily liquidity management support to maintain customer service levels;
• Rural areas face greater difficulties;
• There is evidence that market discipline comes into play for agents who cannot maintain service levels.