Kisumu, Kenya – The picture of a farmer with a cell phone checking market prices is nearly ubiquitous.
Cell phones connect people to each other as families and businesses. However, it is mobile money that may be formalizing Kenya’s small businesses.
The oft-touted M-PESA cash transfer system pioneered in Kenya is changing business just as it did banking. Small businesses are using e-payments to not only collect money from customers, but expand their services.
Cell phone technologies are no longer simply places to make phone calls and check market prices. They are supporting small business growth in Kenya.
Nahashon Mugi, 46, is one business owner doing just that. His Macnut Farms sells fruit tree seedlings across Kenya. His customers make their orders and he sends a text message with information on how to pay by phone. Once the payment is received, he ships the seedlings to the customer.
“Using M-PESA is convenient and more accurate for me,” he said.
Doing so is slightly prohibitive. Users must be registered Post-Pay customers (they pay for monthly phone service rather than add money for calling credit when they want) to enroll as a business in M-PESA. However, registration does have its advantages, says Peter Mwangi.
Mwangi is the author of the Think M-PESA blog. There he documents the ways in which M-PESA is leading to new opportunities and innovations in Kenya. One of the most significant benefits of M-PESA for businesses may be its simplest.
Registering in as a business opens up a series of opportunities. Credit that may have been denied prior due to a lack of information is now an option.
“In the future, a farmer can work with the bank because he can show them the transactions,” said Mwangi.
The loan that the farmers can access will be appropriate for their businesses and possibly not require homes to be put up as collateral. Further, by having revenues enter the M-PESA account, business owners can separate personal and business finances.
“The informal economy is huge here in Kenya,” said Mwangi. “Starting to register and use business names is very big.”
The uses go beyond simple sales. Mwangi points to the example of the Coffee Development Fund. Coffee farmers in the Central and Rift Valley provinces are provided cash advances while they wait for their coffee haul to be valued. The access to money means that the farmers can pay for a child’s education or a health need immediately, rather than wait for the final payment.
Farmers looking for ways to improve irrigation may have interest in the MoneyMaker pump. The device looks and acts just like a StairMaster. Water is drawn upward by the stepping motion and a farmer can water his or her crops. Buying one is not cheap, so KickStart, the NGO behind the pump, offers farmers the opportunity to pay off the balance slowly through M-PESA.
Once the balance is cleared, KickStart notifies the nearest dealer and the farmer that the pump can be picked up or delivered. Farmers who go through surges of income coinciding with crop harvests can pay at their convenience.
Business is good for Mugi. Although he is based in central Kenya, he can now sell to people just about anywhere in the country.
“People are asking me advice on how to set up as a business on M-PESA,” he said.
The feedback is also good from his customers and the business is growing. He says that M-PESA has been a transformational development for his business.