Indicus Centre for Financial Inclusion


M-PESA Study Tour to Kenya


Kenya's M-PESA model has been considered to be one of the most successful models of spreading financial inclusion. Though the environments in India and Kenya are radically different, there are in fact many lessons from the MPESA experience that are still relevant in the Indian context when it comes to scaling up the deployment of a new system, in particular business model elements dealing with pricing, liquidity management, agent network management etc. It is also clear that building appropriate institutional linkages between banks and telecom operators is crucial for achieving true universal financial inclusion in any country.

The Indicus Centre for Financial Inclusion therefore planned a study tour to Kenya between 8th and 12th August 2011 which saw participation of representatives of banks and telecom companies, columnists and academia.

List of Participants

  Name Designation Organization
1 Mr. Rahul Joshi Head, Mobile Banking and Commerce ICICI Bank
2 Nilanjan Majumdar Vice President & Head - Financial Inclusion, Ag & RB Department Axis Bank
3 Sanjeev Patel Vice-President, ATM, Net Banking and Mobile Banking Product HDFC Bank
4 Jayant Sinha CGM, Agri Business SBI
5 Anjani Rathor Sr VP, M-Commerce Airtel
6 Vineet Sehgal Mobile Financial Services, Head Business Development Nokia
7 A P Ghugal GM, Financial Inclusion Bank of India
8 SP Narayanan Senior Vice President- Marketing Idea
9 Ashok Desai Economist and Columnist Business World
10 Laveesh Bhandari Director Indicus
11 Sumita Kale Chief Economist Indicus

Though many of the participants had some idea about the M-Pesa model and its working in Kenya, there were many gaps in their understanding that were filled in by site visits, meetings with Safaricom, Equity Bank, Top Image etc.

Site visits were organised to Kibera, the City Market of Nairobi where participants saw actual transactions, took notes of tariff structures, commissions, account opening procedures, supervision and monitoring procedures, branding and rules of display, documents with agents etc.

Participants understood how different the banking environment is from India and visits to Equity Bank branches showed how the agent network is being developed – participants were interested in the marketing/promotion processes though the scales of operation were significantly lower in Kenya compared to India.

A visit was organised to Kisumu where Pep Intermedius showed the ground realities in a peri-urban set up, helping to understand the agent and liquidity management, commission and employee management. Participants saw the counter at Nakumatt, where Safaricom, Airtel and Yucash were being managed by the same BC, a good experience on the actual procedures while sharing agents.

Visits upcountry in rural Kenya outside Kisumu showed how competition was handled by agents, as well as a Post Office branch where tie-ups had been made with Safaricom.

Main Learnings

Participants got a deeper understanding of the actual procedures and transaction methods in MPESA. While the regulatory and banking environments are significantly different, there are areas where India can learn from the M-Pesa success:

  • The poor do pay for a service that is needed (MPESA is not cheap).
  • The simplicity of the M-Pesa product for people who are unfamiliar with financial products was a major learning.
  • Branding and awareness of the service being provided in Kenya was enormous, India has a long way to catch up on this.
  • The crux lies in managing the agent network and liquidity at the last mile, the enormity of this in India is seen as a bigger challenge.

Workshop at RBI December 2011

Following this tour, Indicus was invited by the RBI to conduct a small workshop where the regulators interacted with some of the participants to hear their views on where the MPESA experience can work for India, given the regulatory concerns that we have in India for financial stability and customer protection.

Some points that came out during this workshop:

What can banks in India learn about realizing business opportunities?

Simple to use product, Build trust through simple systems, Advertising and awareness – branding of the product and Training, supervision and audit of 25,000 strong agent network. But underlying all this was meeting the need of the customer– so each need is different, India's needs will be even more diverse – the point is as we don't know yet what will be the kickstarter for business in India, we need to raise volume of transactions (per se, irrespective of type) through the mobile.

What hits you about MPESA in Kenya:

  • Scale of operations – it's ubiquitous, even more than Coke, and everyone is using it.
  • Simple product- so if you give the customer what he wants, he will pay
  • Major impact on the daily life of the average person in Kenya

What we need in India is to serve a different market – diverse players, diverse needs so collaborative model needed, interoperability is very important, there has to be an open ecosystem which will allow all sorts of transactions but the main point is Simple Simple Simple – keep it simple, we need to aim at convenience, trust and control of money that the customer gets in Kenya.

For banks main learning was in the agent management and branding

For banks in India the ability to support BCs in large numbers is limited, high cost of BC network, the security and trust that banks have earned help get technology easily adopted in rural areas. Telcos help banks in this through large customer base, wide and deep distribution network, strong service orientation, customer acceptance on using the service, retailers are familiar with mobile account opening process. This synergy needs to be exploited.

There was considerable discussion on how to exploit this synergy best, especially on the commission issue. Finally, as Mr. Padmanabhan, Executive Director, RBI pointed out there are three issues the banks and telcos have to sort out – who owns the customer, who owns the transaction and who gets how much of commission.

Dr. Laveesh Bhandari of Indicus pointed out that while the RBI has put in a lot of regulatory support, from now onwards it will be more important to act as a coordinator and facilitator.

Dr. Subir Gokarn, Deputy Governor, RBI concluded – it is clear that Kenya has given basic access to financial services through a technology platform and that is very good. We have to work within the constraints of balancing safety and stability, straddling this line. Channel neutrality is very important and we should be goal focused and not means focused.