M-PESA Global Money Transfer: Over the past two years, diaspora remittances have been on the rise. For example, according to the Central Bank of Kenya (CBK), remittances in Kenya increased to Sh. 219 billion in October this year from Sh. 205 billion in September of 2018.
In the same vein, remittances in Kenya have averaged Sh. 88 billion from 2004 until 2018, reaching an all-time high of Sh. 266 billion in June of 2018 and a record low of Sh. 25 billion in January of 2004. Similarly, over the 12 months to March this year, remittances as a share of the gross Domestic product (GDP) stabilized at 2.3 per cent. “Diaspora remittances account for about 4 per cent of the GDP. This shows that diaspora remittances have become a key support of the Kenya shilling which is currently under pressure due to low export earnings,” says Sospeter Okumu, an economic analyst based in Nairobi.
The inconveniences
The money that is sent back to Kenya from abroad also outpaces the amount that other East African countries receive. For example, the East African region receives about Sh. 350 billion annually. Out of this amount, Kenya is expecting to receive over Sh. 250 billion by the end of December 2018. Yet, diaspora remittances as an economic field are greatly underutilized. In any given instance, Kenya could have received more if the methods and procedures of sending money back home were easier.
Currently sending money across the world costs about 6 to 8 per cent of the amount being sent. For example, a survey by the World Bank shows that senders will pay an approximate of 9.72 per cent of the amount being sent to sub-Saharan Africa. This costs goes up if the money is coming back home. “The available money transfer options have not been friendly to the pocket. I would wish to send more money back home more frequently but the charges and procedures are a deterrent,” says Lisa Okwembah who leaves in Detroit, US.
Her sentiments are echoed by Geoffrey Kimani, who has been struggling to send money every end of the month to his ailing mother. “My mother was diagnosed with cancer mid this year. She has been attending chemotherapy sessions at Kenyatta National Hospital. She has no income and I have been sending her treatment money monthly,” he says.
Despite her frail health, Geoffrey’s mother is forced to undergo the arduous task of receiving money from her son and withdrawing it from international money transfer agencies situated at banks. The closest bank from her home in Subukia is 30 kilometres away in the nearby town of Nyahururu. “I don’t like it that she has to travel all the way in search of banks so that she can withdraw money to buy food or medication,” laments Geoffrey.
Geoffrey is not alone. Many other Kenyans in diaspora are sailing in the same boat. “We have too many Kenyans struggling with the inconveniences and bureaucracy that revolves around money transfer from abroad,” says Okumu. But this breaking of sweat has certainly come to an end if a new money transfer product is anything to go by.
In early November, 2018, leading telecommunications firm, Safaricom launched a money transfer product that will not only see Kenyans send and receive money within the country, but also abroad from the comfort of their mobile phones. Dubbed M-PESA Global, the product is formulated with the ease that has become the hallmark of the pioneer M-PESA platform.
The new order
Previously, senders have resulted to receiving money from the banks because they know that banks are regulated and thus provide a secure system. This will no longer be a concern, says Evelyne Nafula, a telecommunications analyst with a Nairobi-based ICT firm. “Safaricom as a communications and financial entity is one of the most regulated and secure systems Kenya has had. This is the core reason why its flagship money transfer system has maintained its growth and security,” she says. Ms. nafula also sees the new platform becoming a global competitor to the traditional brick and mortar remittance systems. “This is a digital-first from East Africa that is leveraging on technology, affordability, and efficiency to gain traction in the IMT market,” she says. “It will result in both the senders and recipients realizing billions of shillings in savings.”
On M-PESA Global, Kenyans in the country and abroad will now send and receive money, with daily transactions of up to Sh. 70,000 per single transaction and a daily transaction limit of Sh. 140,000. The platform is largely affordable, with charges set at between Sh. 100 and Sh. 500. “What I am seeing is that Safaricom are at the low end of the remittance charges in our network. They are encouraging people to come in and use this,” says Western Union’s regional vice president for Southern, East and Anglophone West Africa Richard Malcom.
For many families with relatives living and working abroad, this means that there will be dinner on their table, school fees for their children or medical support for the sick relatives. For example, according to a 2010 paper by University of Nairobi economist Joy Kiiru, 80 per cent of the remittances are used for basic household consumption while the remainder is invested in education, health and better nutrition. Mercy Mutinda who lives in Boston, US concurs. “I decided to leave my daughter with her grandmother in Kenya. If I sent money, I know she will eat well,” she says.
Donald Kamau, who lives in Massachusetts, is already reaping the fruits of this new money transfer service. “I tried sending Sh. 70,000 last week,” he tells Bizna Kenya.
Previously, I used to send Sh. 100,000 through an IMT, and wait for six working days for the receiver to be cleared. A credit card would also cost me up to Sh. 4,500 for the same amount. But last week, I only paid Sh. 500 only,” he says. Interestingly, Safaricom’s M-PESA Global will be riding on the extensive network of global money transfer firm, Western Union.
This is bound to effectively expose over 24 million M-PESA users to a network of about 500,000 agents and bank accounts in over 200 countries across the world. “Unlike before, Kenyans will now be able to tap into Western Union’s cross-border, cross-currency money movement platform. This union is bound to set a new bar for international money movement, especially because the two firms have a strong network, digital, compliance, and infrastructure footing,” Samuel Kurei, an information technology expert based in Nairobi.
Nonetheless, this does not mean that M-PESA users will need to travel to agencies in order to send or receive money. They will be able to do by simply dialing *840# on their mobile phones or by selecting “M-PESA Global” under the M-PESA menu on the MySafaricom App.
From Kenya
Apart from receiving money from abroad, M-PESA users will now able to settle low-value overseas bills such as sending students pocket money directly from the phone, while foreigners working in Kenya can remit cash back home to their families.
“The norm has been that people receive money from Kenyans living abroad. This platform now makes it possible for Kenyans with relatives overseas to extend financial helping hand from the comfort of their mobile phones,” says Mr. Okumu.
But that is not where the innovation of M-PESA Global ends. Safaricom is also targeting a share of payments made by small businesses and individuals, who are increasingly shopping online in offshore stores.