Mobile Telephony in Kenya
… is it “Making life better”?
Luca Manica
Michele Vescovi
ICT4SD course – May 2008
Outline
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Introduction
ICT and Development Countries
Mobile Telephony in Kenya
M-PESA system
Conclusions
Why this Topic?
UNPD Human Development
Report 2001
• 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
The ICT Role
New Technologies
BE OPTIMISTIC!
ICT can give opportunities of Social Development:
• better life conditions
• new jobs
• new opportunities of business
• more information
BUT ICT are not a magic WAND!
The Morana’s Mobile Phone
Impact of the new technologies on the Kenyan culture
Economic Impact
Poverty
• shame
• look rich!
Cultural Impact
Be like a White
ICT make Mistakes
• lost of traditions
• political choices
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)
Mobile Telephony
• 70 - 80% population covered (March 2007)
• Mobile penetration: ~ 30% = 11milion Kenyans
• 98% prepaid traffic (per second billing)
• 20% geographical
area covered
(March 2007)
• Coverage is still
growing …
Mobile Operators
• Safaricom (1996)
– ~ 9 milion subscribers
– 40% Vodafone (U.K.)
“The better option”
• 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
“Making life better”
“? ? ?”
Third operator ?
“Coverage” by Province
# Safaricom’s Base Stations
Coverage by Operator
What is covered ?
Safaricom
Celtel
1.
2.
3.
4.
Popul. / Business
Tourism
Main roads / links
…
?
Development
of remote / crisis
areas
Mobile Network vs Fixed-line
2001:
# mobile telephony subscriptions
overtaked
# fixed telephony subscriptions
Communication Commission of Kenya (CCK), report 2006/2007
Mobile
Network
Fixed-line
PERIOD
2002/03
2003/04
2004/05
2005/06
2006/07
Wireline Connections
328,358
299,255
278,867
293,364
263,122
Urban Connections
309,070
284,264
264,509
279,079
251,924
Rural Connections
19,288
14,961
14,358
14,285
11,198
Waiters
Traffic to Mobile
Networks (minutes)
PERIOD
111,867
109,758
93,192
64,618
26,925
230,000,000
209,944,354
163,324,095
150,000,000
124,378,826
2002/03
2003/04
2004/05
2005/06
2006/07
Capacity
2,000,000
3,935,000
6,800,000
10,600,000
18,200,000
Connections
1,590,286
2,546,157
4,611,970
6,484,791
9,304,818
-
-
-
201,445,683
315,557,601
SMS
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
Mobile banking
• Mobile banking… a development opportunity?
• 80% people unbanked in 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
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
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
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
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
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)
Conclusions
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No “Right or Wrong” in ICT
ICT can give opportunities of development
Systems developed in “western way”
Does ICT really change the situation?
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
Thank you!
Questions?
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Mobile Telephony in Kenya … is it “Making life better”?