M-Pesa seen withstanding CBK’s digital shilling threat


An attendant makes an M-Pesa transaction for a customer. PHOTO | JOSEPH KANYI | NMG

Safaricom’s M-Pesa retains a competitive advantage over the proposed Central Bank Digital Currency (CBDC) due to the wide reach of its agent network and ability to operate on feature phones, analysts say.

The proposed Central Bank of Kenya (CBK) digital shilling, which is currently under public discussion, is seen as a competitor to mobile money down the road, especially in its ability to lower transaction costs.

Analysts at investment bank EFG Hermes said that the CBDC is unlikely to achieve wide adoption since it needs a smartphone app to operate, echoing sentiments made by CBK governor Patrick Njoroge earlier last week.

While M-Pesa also has an app, it can run on feature phones without requiring an internet connection.

Safaricom has also expanded the product to offer a wide variety of financial services, including merchant and bill payments, business cash transfers, remittances, and bank to wallet transfers.

“M-Pesa will still have a competitive advantage in terms of a captive market as well distribution aspect as well, where it has over 258,000 agents ensuring that the service is accessible to a large proportion of the population,” said Silha Rasugu, EFG Hermes associate vice president—utilities, telecom, oil, and gas.

In an interview last week, the CBK governor identified the lack of access to smartphones by more than half of mobile users in the country as one of the biggest stumbling blocks to the rollout of the CBDC.

Dr Njoroge said the fact that the digital currency will run on 4G-enabled smartphones would hurt Kenya’s financial inclusion and effectively lock out half of the population from transacting in it.

Official data shows that 33 million or 56 percent of the 59 million cell phone devices in use in the country are feature phones, meaning it will be difficult for half of the subscribers to transact using CBDC.

M-Pesa on the other hand has gained widespread usage and acceptance since it was rolled out in 2007 and now accounts for 99.9 percent of the country’s mobile money market.

In 2021, mobile agents transacted Sh6.8 trillion, a 31.7 percent jump from Sh5.2 trillion a year earlier, translating to Sh18.63 billion transacted per day.

The uptake of smartphones is however expected to grow significantly in the medium term, driven by falling costs of devices and availability of consumer credit seeking to facilitate people to buy higher-end gadgets.

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