iHub Research By iHub Administrator / October 22, 2013
Mobile Phone Penetration vs Mobile Money vs Electricity Penetration in Kenya
by Christine Mahihu
iHub Research’s Data Science and Visualization Lab has been studying what is happening in the telecommunication industry and how it correlates with other industries and the economy at large. While examining the data we compiled on mobile phone usage at the bottom of the pyramid, it was clear that mobile penetration has drastically changed the lives of many in this county. This special relationship Kenyans seems to have with their mobile phones is well documented. Also interesting to understand is how the ICT sector in Kenya, specifically the use of mobile phones, has affected or caused consequential reactions in other sectors. We compared data from our study supported last year by Infodev and comparative national statistics to find out the effect of mobile phone usage on other sectors. Two areas related to mobile penetration stood out: financial inclusion and electricity penetration. It is not apparently clear if one affects the other and/or how, but it is interesting to explore these relationships.
According to research done by RIA, 60.3% of all Kenyans send or receives mobile money. 73.5% from the top of the pyramid (ToP) and 41.6% from the bottom of the pyramid (BoP) (RIA, personal communication, 2012). Further, according to an article in the Economist, 2/3 of the adult Kenya population use M-Pesa, supported by about 40,000 agents spread out all over the country. From the sample size in the study Mobile Usage at the base of the Pyramid (BoP) in Kenya, 81% use M-Pesa. This is much higher than the 41.6% reported by RIA. This is because RIA data was representative and included a larger sample size than our study, which specifically went to 12 locations in the country where mobile applications were being piloted. Growth in the adoption of mobile money is indeed very impressive given that in 2010 M-Pesa, the dominant mobile money solution then, had only 13 million subscribers. This number shot up to 15 million two years later, with the total number of mobile money subscribers at 19 million in 2012 (includes all other mobile money service providers). The sharp increase in mobile money subscriptions in 2011 is reported as a result of the entrance of other mobile money services- Yu cash, Telkom (Orange money) and Airtel money.
Mobile money has greatly improved financial inclusion in the county, seemingly outperforming traditional financial services. Data from the BoP survey showed that only 37% of those sampled have a bank account. This compares poorly with those that use mobile money. What was more surprising was that 50% used M-Pesa but did not have a bank account. How does this compare to national statistics?
In 2010, the number of bank accounts in Kenya as reported by The Central Bank, was about 10.6 million, almost at par with mobile money subscribers. By 2012, mobile money subscribers had overtaken bank accounts by about 3 million. It is important to note that the number of subscribers does not necessarily represent individuals or businesses, as one could have both multiple bank accounts and mobile money subscriptions. Regardless, the pace of mobile money subscribers has clearly outgrown traditional banking services and people seem to even prefer the former. Banks are now quickly adapting mobile banking options as is evidenced by the numerous products advertised, one of the earlier ones being M-Kesho by Equity bank.
One would assume that phone penetration greatly depends on electricity penetration. However, Kenya Power reports electricity penetration at just 29% . This raises the question, how do people charge their phones? Many businesses in rural areas have taken advantage of the situation and offer charging services to customers not connected to the grid. Solar energy companies have also designed their products to allow phone charging in addition to lighting.
Some manufacturers, however, may argue that people own more than one phone or multiple SIM cards, skewing phone penetration to a much higher number than it actually is. Moreover, the estimated electricity connections since 2009 are lower than the count of 1.9 million homes with electricity connection at the last census (in 2009). These disparities show the need for collecting and publishing adequate and accurate data on both phone penetration (that factor in multiple phones and SIM card ownership) and clear data on electricity penetration and number of customers.
The information that is much more readily available is the number of rural customers connected to the grid under the rural electrification program. This number grew from 161,354 in 2008 to 382,631 in 2012. There were however close to 5.4 million rural households counted in the last census, meaning that this program still has a long way to go. Despite the difficulty in obtaining accurate data, it is clear that electricity penetration growth nationwide correlates with phone penetration.
In summary, mobile phones have affected these two sectors in one way or another. With banking, mobile phones have facilitated a whole new way of managing money that has widened financial inclusion and created opportunities. In electricity, mobile phones have also created new opportunities and also pushed the need for increased activity in electricity/energy generation. Tracking future activities in these sectors will give us an idea of just how much mobile phones affect not only the economy, but our lives in general.
 Kenya Power conference presentation, April 2013
Photo Credit for the Featured Image: http://paymentsafrika.com/
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