1. MOBILE PHONE FINANCIAL SERVICES
INTEGRATION & FINANCIAL INTERMEDIATION     Discussant:  PROF. NJUGUNA NDUNG’U, Governor, Central Bank of Kenya                                  

2. Mobile Phone Financial Services
Background Mobile-phone based financial services are having a transformative impact on low-income economies.  In Kenya, the mobile phone financial service plays a dominant role in rural areas, with important vertical integration consequences for existing financial service providers, including micro-finance institutions and SACCOS.  There has been vertical integration with mobile phone financial services and commercial banks.   Question: Does mobile Technology enhance financial inclusion for the poor?                                      

3. Mobile Money Transfer Industry Overview
A Fact Sheet on Kenya
Mobile financial services commenced in 2007 with the introduction of M-Pesa money transfer service by Safaricom.
Mobile financial services are offered through a network of agents spread across the country
Currently these agent number 50,471 and include outlets such shops, petrol stations, chemist shops, banks and micro-finance institutions; these are now agents and super agents .
Customer base as at end of December 31, 2011 stood at over 19.2 million.
The industry transferred Ksh billion with million transactions in December 2011

4. Mobile Money Transfer Industry Overview
As at DECEMBER 2011
Safaricom million customers.
Airtel 3.16 million customers.
Yu 0.52 million customers.
Orange 0.13 million customers
Tangaza 0.07 million customers
Mobikash 0.11 million customers

5. Mobile Money Transfer Industry Overview
As at DECEMBER 2011
Safaricom moved Ksh billion with million transactions.
Airtel moved Ksh 0.42 billion with 0.35 million transactions.
Yu moved Ksh 0.02 billion with 0.01 million transactions.
Orange moved Ksh 0.02 billion with 0.06 million transactions.
Tangaza moved Ksh 1.31 billion with 0.98 million transactions.
Mobikash moved Ksh billion with 0.01 million transactions

6. Integration & Financial Intermediation
outlets
Bank of Africa 1
Barclays Bank of Kenya 64
Commercial Bank of Africa
Chase 15
Consolidated 9
Co-operative 83
Eco Bank 12
Equity 22
Family 53
Gulf 10
Housing Finance 7
Imperial
KCB
157
KFWT
NBK
TOTAL
461

7. Integration & Financial Intermediation (cont)
OBSERVATIONS
A number of banks offer mobile money financial services and include both large and small banks.
They facilitate transfers to and from bank accounts from the mobile phone platforms.
Number of participating bank outlets as at December 31, 2011 was 461
In addition, a number of banks use the mobile channels to mobilize deposits, make inter-bank transfers, or loan repayments.
Such interfaces render banking services more convenient for customers who need not travel to their branch for financial services

8. Integration & Financial Intermediation (cont)
The M-Kesho, Pesa-Pap, KCB Bankconnect, and ATMs mobile link are recent initiatives to integrate the mobile payment platform with the Banking Sector. The impact on intermediation and deposit mobilization will be the subject for research. The M-Kesho is important because it transfers the balances in Sim cards to micro savings account – now we can see a direct link from M-Pesa to financial intermediation

9. M-Kesho Account - Highlights
799,532 accounts already opened since May 2010 launch.
240,633 customers have already transacted.
Total deposits Ksh 884,845,626 equivalent to US$ 10 million, average deposit Ksh 1,106 equivalent to US$12.7.
Transaction turn-around is less than 5 minutes.
Account opening can be originated at 136 Equity Branches and 1,162 M-Pesa Agents and 3,087 Equity specific agents.
Accounts opened within 48 hours at Equity Branches.
Credit to be based on M-Kesho and Safaricom track record.
No. of accounts
Balances (Ksh)
Central region
141,316
151,302,388
Coast region
36,348
75,342,398
Eastern region
81,328
120,962,340
Nairobi region
172,360
240,234,450
North Eastern region
7,678
10,283,544
Nyanza region
76,238
52,959,546
Rift Valley region
207,124
202,390,901
Western region
77,139
31,370,061

10. Mobile Phone Financial Services Cost Curves
Withdrawals & transfer costs
Cost of both withdrawals and transfers are now below 5 percent of withdraws or transfers above Ksh 500($ 6)
However, transfers and withdrawals of Ksh are still high.

11. Risk Mitigation Approaches
Mobile phone financial service providers must always ensure adequate risk mitigation.
Some methods used in Kenya include;
Filtering out fraudulent SMS through SMSC filtering engine
Tracking of fraudsters and enhancing the KYC procedures.
Automatic black listing of fraudsters
Agent training programmes

12. Conclusions
Increased use of mobile phone financial services by both individuals and corporate organizations: Person to person is still dominant, business to persons and persons to business - are all increasing.
Mobile money transfers appeals to consumers across the geographical divide.
The cost of mobile financial services has remained low, enhancing use by the poor.
The mobile technology therefore is contributing towards financial inclusion: services, cutting costs, improving access and now a mode of savings from phones to savings accounts.

13. Person to Person Transfers
Person to person transfers dominate M-Pesa transfers.
In December 2011, Ksh billion equivalent to US$ 751 million was transferred.

14. Other Transfers (P2B, B2P & ATM)
Person to person transfers have dominated
Person to business and business to person have picked up from March 2011.

15. THANK YOU & DISCUSSSIONS