Economic strain is significantly affecting mobile money transactions in Kenya, with the total value falling to Sh711.7 billion in April 2024 from Sh747.7 billion in March, marking a 4.81% decrease.
According to the Kenya National Bureau of Statistics (KNBS) leading economic indicators for May 2024, the number of mobile money agents rose from 320,300 in March 2024 to 331,600 in April 2024. However, mobile money subscriptions declined from 77.7 million to 77.4 million during the same period.
The total number of transactions also decreased from 207.8 million to 203.6 million, and the total value of these transactions dropped from Sh747.7 billion in March 2024 to Sh711.7 billion in April 2024, as noted by KNBS.
This decline happened despite a reduction in inflation to 5% in April from 5.7% in March, which usually improves consumer purchasing power.
The lingering effects of higher inflation earlier in the year, with rates of 6.6% in January and 6.8% in February, likely impacted consumer behavior and contributed to the reduced transaction volumes. This decrease follows a peak inflation rate of 9% experienced in 2023.
Despite the recent decrease in inflation, rising costs have diminished consumer purchasing power, leading to reduced discretionary spending typically handled through mobile money platforms.
Nevertheless, the overall trend reveals a strong mobile money ecosystem, with significant transaction volumes and values throughout the period. The peak occurred in December 2023, with 213.31 million transactions valued at Sh788.35 billion, while the lowest point was in January 2023, with 198.31 million transactions valued at Sh589.30 billion.
Mobile money transactions are vital to Kenya’s economy, contributing approximately 70% of its gross domestic product (GDP). In 2022, the total value of mobile money transactions reached Sh7.91 trillion, marking a 15% increase from the previous year.
This growth has revolutionized financial access, especially for the unbanked, facilitating seamless transactions and reducing cash dependency.
The competitive landscape between mobile operators like Safaricom’s M-Pesa and banks has intensified, spurring innovation and expanding the digital payments ecosystem. Mobile money also plays a role in poverty reduction, offering essential financial services to millions.
On July 29, 2023, Safaricom raised its mobile transaction fees for M-Pesa following the implementation of the Finance Act 2023. This adjustment, reflecting an increase in excise duty on mobile money transfer services from 12% to 15%, affected various transaction types, including money transfers and withdrawals.
Mobile money ecosystem
The new charges were part of broader changes in the mobile money ecosystem, aimed at balancing operational costs with service accessibility.
While the withdrawn Finance Bill 2024 initially proposed raising the excise duty on mobile money transfer fees from 15 per cent to 20 per cent, the government suspended this increase following public backlash regarding its potential impact on financial inclusion.
