Early observations from Kenya
Kenya is home to the well-known and widely-used M-Pesa mobile cash transfer platform, also known as mobile money. Since launching in 2007, M-Pesa has grown at a phenomenal rate. As of October 2013, 62% of Kenyans were active M-Pesa users, mostly using it to send and receive payments, buy airtime and for transactional storage. M-Pesa is not as commonly used in the social sectors as one would expect, but this is changing slowly. On a recent trip to Kenya, I took the opportunity to visit Bridge International Academy and Penda Health to learn more from two programs that currently use mobile money to extend education and health services to the poor. I had selected the programs from the Center for Education Innovations (CEI) and Center for Health Markets (CHMI) databases and was particularly interested in exploring trends, similarities and differences in mobile money use across the two sectors. A few highlights are shared below:
Different approaches to incorporating mobile payments in program design
Founded in 2007, Bridge International uses a standardized “Academy in Box” approach to deliver high quality education to over 359 low cost private schools in Kenya. Mobile payments are fundamental to the Academy which is entirely cashless – a signature approach in itself. Mobile money is used for school fee payments, teacher salaries, supply purchases and vendor payments, eliminating any need for a separate finance or accounting function at the Academy level. Instead, Academy Managers are equipped with a basic smart phone which they use for tracking tuition payments, budgets and payments to vendors. A green thumbs-up clears a student for attending classes, a red thumbs-down signals an overdue or missed payment. Cash is not an option in the Academy model.
Bridge’s overall program strategy has been to design for scale from the outset. New schools in Kenya are opening at an unbelievable rate of 50 new schools every four months. Bridge’s upfront investments in technology, including a custom back-end system for managing payments, have facilitated operational efficiencies that have been instrumental in the Academy’s ability to serve over 100,000 students in a very short amount of time.
Penda Health is a for profit social enterprise launched in 2012 with the aim of providing high-quality, one-stop primary healthcare services to poor and informal sector populations in Kenya. Each clinic has an onsite pharmacy and the ability to perform basic lab tests and x-rays. While M-Pesa is offered as a payment option for settling bills, it’s not an enforced or widely advertised option. On average less than 1% of monthly revenues come from payments made using M-Pesa. Clinic staff have observed that patients with higher bills are more likely to use M-Pesa (typical service charges are low and in the range of 550 KES, approximately 6 USD). Many will sit in the waiting room for hours making appeals for contributions from friends and family, which they receive via M-Pesa. Penda Health also uses M-Pesa to send office managers a weekly petty cash budget for purchasing small supplies. Additionally, M-Pesa is being used in a new initiative that aims to improve diagnostics by incentivizing lab and x-ray referrals from local chemists. M-Pesa payments are sent to referring chemists as soon as a patient seeks services from Penda Health.
Penda Health’s overall program strategy has been to develop a solid first model for its primary care clinics before seeking to scale-up. Since launch, Penda Health has expanded to 2 clinics, each serving approximately 1000 patients a month. The goal is to expand to a third site once the clinics are able to regularly serve 1600 patients each month. Penda Health relies heavily on focus group discussions to inform its model and approach. For example, while the clinics initially were designed to serve women, through discussions with the community they learned that it also was important to have a place to bring men and children. Mobile payment solutions have not featured as prominently in their overall approach.
Predictability and size of payments may influence the decision to use mobile money
- Bridge’s monthly tuition fees are the same across the board - for every student and for every month, which can make it easier to standardize monthly collections. Parents know that they are responsible for sending in a monthly payment of 6 USD by the 10th of each month and this doesn’t change.
- Penda Health payments depend on services received and medicines purchased and are harder to collect in a standardized way. Further, patients often need flexible payment options particularly when bills are high. While mobile money gives patients the ability to conveniently make payments in small amounts, as funds become available, many Kenyans remain loyal to cash, so the ability to mix-up cash and M-Pesa when bills are high, provides the most flexibility.
Whether in education or health, many common challenges
- Smart phones offer an easy way to track financial transactions, but internets costs associated with centralized, back-end systems add up.
- While Bridge has successfully negotiated a lower transaction fee with Safaricom, transaction fees associated with sending money remain a huge barrier. Fees associated with making salary payments also add up.
- There is a continued need to create more awareness about value-added M-Pesa products, such as bill pay services. Even when transaction fees are removed, as made possible by Penda Health’s Lipa Na M-Pesa bill pay account, M-Pesa use is low for reasons that may include a lack of awareness or mistrust of the service. For many, a physical receipt is still the preferred form of payment confirmation. This study shows low uptake of such value-added mobile services by poor rural and female Kenyans.
Different strategies to expand mobile money use
- Bridge is exploring a pre-paid savings card that would allow parents to save and pay for tuition costs incrementally. There also are ideas to offer financial literacy classes for adults to address the need for greater financial literacy in its parent population.
- Penda Health recognizes M-Pesa as an important tool that can help to improve recordkeeping, and reduce vulnerability to fraud and theft. Now that the first two clinics are solidly on their own two feet, they are actively exploring strategies for marketing and encouraging M-Pesa payments, from visible displays of the M-Pesa logo to offering discounts to patients who use M-Pesa.
As we continue to review programs in the CHMI and CEI databases that use mobile money, we hope to provide additional insights on trends in mobile money use, and opportunities for learning and sharing across programs in education and health.