Case Study
Innovation and Adaptation on the M-PESA Rails
Identifying challenges in offering financial services to the poor
This note examines savings and related services offered to the low income market segment using M-PESA “rails,” and highlights the challenges they face. The study gathers data from 14 financial institutions that have tied-up with M-PESA.
M-PESA has grown significantly since its operations started in March 2007. It has 14 million customers serviced by a 28,000 strong agent network spread throughout Kenya. Institutions using M-PESA work in different areas of financial services, offering savings, loans, health and life insurance, pension and investment products. Study findings indicate that:
- Financial institutions linked to the M-PESA platform use adaptation more than innovation;
- Most financial institutions have only linked their systems at the back-end with Safaricom and are offering their existing products through M-PESA;
- Most financial institutions have linked to M-PESA’s “pay bill” platform to facilitate customers’ deposits into accounts;
- Deposits and withdrawals through M-PESA is an expensive proposition for the customer;
- Customers have faced delays in receiving money into their M-PESA account, limiting their ability to withdraw when they need money;
- Financial institutions appear unsure about the overall costs and benefits arising out of their partnerships with M-PESA.
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