Building a New Future for Mobile Money

NAIROBI, KENYA –  Kenya is the world’s poster-child for mobile money success.  With a penetration rate of 985 registered mobile money accounts per 1,000 people; no fewer than 93 percent of Kenyans have made transactions via mobile money – this includes those in the rural area.

The rapid expansion of mobile money has not only facilitated easier and safer savings; it has also lifted roughly 2 percent of Kenyan households (some 194,000) out of extreme poverty and enabled about 185,000 women to move out of subsistence farming into business or sales occupations. Majority of these people are rural-based and lack the critical mass [population] that most financial institution looks at when setting up branches.

In 2010, Musoni Kenya [‘Musoni’ consists of m for ‘mobile’ and the Swahili word usoni means ‘future’], a technology-driven microfinance organization began offering cashless financial services to low-income populations in Kenya through mobile money payments. Musoni is the first Microfinance Institution [MFI] in the world to offer a 100% cashless and data-driven microcredit financial service.

The Nairobi-based microfinance institution leverages on technology to reach the financially excluded populations in a cost-effective way.

“By use of mobile money technology, we bring reliability, safety, and flexibility to the rural client,” Stanley Munyao, the CEO of Musoni Kenya told Rural Reporters.

Musoni is backed by five international shareholders – Musoni BV Holland, KfW – the German Development Bank, AccessAfrica Fund Managed by Microvest, Grameen Foundation, and Oiko Credit. So far, the MFI has established 20 service points across 12 counties [out of 47 counties] in Kenya and now has a loan book of about KSh1billion [$9.7million] with over 35,000 active clients. 65% of these clients are rural residents, who do not have access to financial services.

Gaining Active Customers

Musoni works as an independent credit-only microfinance organisation that mainly provides financial services to low-income earners.

Unlike in the traditional setup where clients need to commute to present a passport photograph and other paper documents as means of identification to open a financial account, Musoni model is simplified since the loan officer open client’s account in the field through the help of a ‘Musoni tablet’. The technology supports account opening, loan application, as well as disbursement of funds into the client’s M-PESA e-wallet account in less than 24 hours without any paperwork in the entire cycle.

To turn potential clients to active customers, Musoni invests in educating clients on the comparative advantage of signing up on Musoni and the convenience that comes with it. For instance, Munyao says it takes less than 5 minutes for Musoni loan officers to register a client and less than 10 minutes for loan officers to submit a loan application for a client.

Customers can apply and get loan application done without human intervention and in a paperless manner and right on their phone. Once the loan is approved, Musoni deposits the loan into the client’s M-Pesa [mobile money] wallet which can be accessed via the over 60, 000 mobile money agents in the country.

The client has the choice to either purchase his or her goods through M-Pesa or convert the M-Pesa e-cash to cash. In return, clients pay their loans in instalments via M-Pesa without necessarily boarding a bus or public vehicle to the bank which could be some hundred kilometers away. That mobile flexibility gives Musoni the ability to scale up in rural areas.

“When clients contact us for a loan, we either send a loan officer to their business to open a Musoni account for them, or we ask them to come to our office for registration,” Munyao explained.  “We are however moving to a level of self-registration, whereby customers can do the registration themselves on the Musoni system.” While the current app can only be accessed by its loan officers, Musoni is currently working on an app that will enable clients to create an account by themselves.

Musoni charges an average interest of 20% per annum on its loans and maintains a high level of loan book quality with a repayment rate of 97% – way above the industry standard. Munyao attributed this success to the company’s investment in its financial literacy training and the use of mobile technology that allows clients to pay their loans flexibly from any location.

Maximizing Growth

Although Musoni strives to exclusively online, it sometimes battles with unreliable internet connection in rural areas.

Alice_Machakos, a Musoni client Photo credit: Musoni Kenya

“Our relationship officers have to compensate by working in the online and offline mode. If a loan officer is working in an area where the internet connectivity is slow or isn’t working at all, he or she switches to offline mode to collect the necessary information and upload the data when they get back to the office,” Munyao said, adding that this is not the intention of the Musoni module.

In 2015, Musoni got US$1.3million financial banking from Mastercard’s Fund for Rural Prosperity [FRP] to enable it to deploy mobile financial access to more people and train 18,000 clients in 3 years, of which 60% would be women and youths.

In the last one year, the fund has helped Musoni scale up its agriculture loan portfolio.

“Before signing the FRP fund, our Agric portfolio was slightly less than 20 percent, but with the help of the fund, within a year, we have been able to grow it to about 30 percent.”

“We have also been able to reach more agricultural-based client, improve customer training in two fronts – financial, agricultural trading and agricultural practices – and also enhance our technology platforms to serve our rural clients better,” Munyao explained.

In the nearest future, Musoni intends to extend its product offerings to other counties in Kenya and the East African region.

A tech-savvy Future for MFIs in Africa

According to Munyao, the future of microfinance in Africa depends on its bulging youth population who can be economically active if given the tools of the trade and access to working capital.

“Africa is blessed with enormous agriculture potential and good climate condition. Financial institutions need to look at productive areas like agriculture and leverage on it. If this is done, Africa can potentially feed itself and the whole world,” he said.

“You can’t do much of agriculture lending in urban areas but in rural areas. And for any financial player working with rural communities, you will find economically active people who are willing to work but who need the financial product to be productive.”

A Musoni Loan officer takes photo of a client. Photo credit: Musoni Kenya

However, he noted that this advantage is “limited to institutions that are willing to adopt technology solutions to deliver their services to farmers.”

“Microfinance in the old school way [Grameen bank way], may not be ideal for Africa moving forward and this is mainly because of the cost of delivering financial services. In many African villages, people don’t live in close proximities, and you have got to cover kilometers to reach thousands of clients. In this case, you need technology to help address that problem.”

For those who perceive lending to rural farmers and business people as high clients, Munyao says the trick is to “go down there. Relate with the rural people and farmers, and you will realize that there are a majority of good low-risk clients in rural communities.”

“Don’t just go there with one solution which is giving credit or providing financial products. You need to complement it with nonfinancial services,” he reinstated.

Featured Image above: Musoni BM, with a client. Photo credit: Musoni Kenya.