The especially those in the rural areas who

aim of this paper is to analyze the effect of mobile money in Kenya with a
special interest on the small business enterprises.  Mobile phone in used to transfer funds
between banks or accounts, deposit or withdraw funds, or pay bills. This term
is also used for the broader realm of electronic commerce; it can refer to the
use of a mobile device to purchase items, whether physical or electronic
(Agrawal, 2009)

has been in the leading board on the success story of the development and
adoption of mobile money transfer. Four companies provide mobile phone services
in Kenya. These include Safaricom, Airtel (formally Zain), YU and Orange
(formally Telkom Kenya). Safaricom was the first company to provide mobile services
and MMT services in Kenya. In partnership with the Commercial Bank of Africa
and a micro-finance company, Faulu Kenya, Safaricom designed and tested a
micro-payment platform called M-PESA in 2004. ‘Pesa’ means ‘money’ in Kiswahili
and the prefix ‘M’ refers to the use of a mobile phone to facilitate banking
transactions. M-PESA began by using Safaricom’s airtime retailers (agents) to
issue microloans that borrowers would repay at an interest rate reduced by
eliminating the overhead conventional microloans carried. However, the skilled
worker in Kenya soon began using the facility to transfer cash from working
relatives in the city to their families in the rural areas (Hughes and Lonie,

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the mobile money sector, Kenya but ahead of the world: it is designed to bring
the economic advantages of having a savings and money transfer facility to
those with small, irregular or cyclical incomes (Pagano, 2001) Recent evidence
suggests that there is an increase in penetration and use of MMT Services in Kenya.
In early 2011, Safaricom had an M- PESA subscription base of about 16 million
and about 17,000 agents (outlets) country wide(Central Bank of Kenya, 2011).

was in the twentieth century when mobile phones use increased dramatically as
people found these portable electronic devices to be convenient and easy to use
(Orozco, Jacob and Tescher, 2007). As a result of seeing people inclined to
their phones, operations such as banking, money transfer and paying of bills
was made easier by use of phones to perform such errands conveniently. This was
also established to be of benefit to the very many people especially those in
the rural areas who lacked access to financial services such as savings
account, credit insurance and payment services. During that period, a great
percentage of the country’s households were financially excluded. Today in
Kenya the adoption of mobile money services has been very successful. Mobile
financial services aided companies to address needs of users (Njuguna & Mwangi,

money transfer operates in a simple and a very efficient manner. This is by
assisting the customer to use the phone device as a bank facility whereby
saving and loaning is at the tip of the customers’ phone keyboard. This has
greatly easened the transfer of funds between customers and hence hastened the
way of doing business within the country. Services like banking and utility
payment in now done from the comfort of one’s phones eliminating the previous
modes of payment which involved lining up for hours to get the same services. A
customer also has access to the cash at any one time and requires only
authorizing the money transfer or withdrawal from his end to gain access to the
same. (Dichter, 2007).

money transfer providers are economic organizations or business organizations
that can be family firms, partnerships or limited companies that had been
formed with the aim of fulfilling a certain objective that was set. The
providers engaged in business ventures that ranged from vendors, manufacturing,
and customer service. The providers’ juggled different types of businesses with
the aim of making ends meet for themselves while ensuring they remained
enterprising and retained customer base and thus in most cases may be
specialized in a certain industry and still engaged in another for revenue
purposes (Dichter, 2007).

had a clear edge over banks especially because it was fast and cost-effective.
For instance, to send KSh. 35,000 ($350) within the country using a classic money
transfer company such as Western Union would cost KSh. 1,200 ($ 12), but using
MMT method, such as M-PESA, to send the same amount would cost only Ksh. 75($
0.75) which is 6 times cheaper (Central Bank of Kenya, 2010).Classic money
transfer methods requires that one must visit a given post office or bank
(which could be a long distance away) to receive the remitted cash. Most banks
and post offices were associated with long queues and fixed times of operation
hence the opportunity cost of time spent while waiting to obtain the cash and
other transaction costs were usually high.(Masinge,2010)

Money operators (MNO’s) are telecommunication organizations that provided
telephony services such as voice, data, short messages services (SMS) that
enabled customers to communicate with one another through provision of the
service and most recently we had money transfer service through the use of
mobile phone (Ivatury and Pickens,2006). In Kenya, there are various
telecommunication companies like Essar Telecom commonly known as YU that was
launched in the market in December 2008 and have their mobile money transfer
(MMT) system called YuCash, Orange Telecom with Orange Money-Iko PESA, Airtel
Kenya with Zap and Safaricom with M-PESA(Pilat, 2009).

applicability of Agency theory is also explained as exhibited by the
relationship between one party called the principal, that delegates work to
another called the agent, in the mobile money operations. To thrive and
penetrate in any country MNO’s provided business opportunities to the providers
to act as their intermediaries with their key role acting as wholesalers or
distributers of their merchandises that is airtime vouchers, SIM cards,
handsets, laptops and various electronic devices (World Bank, 2006). It enabled
the providers to take up the business venture and embraces it as an additional
revenue generation to their current business through the improvement of access
to financial services, such as savings, deposits, insurance and remittances, as
a vital to reducing poverty. Transaction
cost theory is also explained as the acting companies within the mobile money
sector expand or source out activities to the external environment. This is in
a bid to minimize the costs of exchanging resources with the environment and
minimize the bureaucratic costs of exchanges within the company. This implies
that companies weigh the costs of exchanging resources with the environment,
against the bureaucratic costs of performing activities in-house (Coase, 1937).

helped poor people to invest in productive assets like livestock, a loan helped
in expanding business activities, and insurance provided income for a family
when the breadwinner became sick. In many developing countries, however, 9 out
of 10 people do not have a bank account or access to basic financial services
(Pickens, 2009).

people were often not considered viable customers by the formal financial
sector as their transaction sizes were small, and many lived in remote areas
beyond the reach of bank’s branch networks. Informal banking services such as
microfinance, village savings and loan associations remained limited to their
reach (EMI, 2010).


study seeks to answer for the following questions:

The role mobile money has played on the rise of small business in   Kenya?

To what extent does mobile money transfer affect the mode of doing business in

How the mobile money has affected the common citizen in Kenya, on saving and
costs perspective?

study employees explanatory research design which focuses on why questions by
developing casual explanations. An explanatory survey design shows how
variables relate to each other. It aims at establishing a cause and effect
between variables. The dependent variable is economic growth for the year 2007
to 2015. The independent variables are mobile money transfer agents, mobile
money transfer customer enrolments, mobile money transfer transaction frequency
and mobile money transfer deposit value.

secondary data will be collected from the CBK and the (KNBS) Kenya National
Bureau of Statistics reports. The study’s data collection source will be  justified by the fact that data on mobile
money transfer agents, mobile money transfer customer enrolments, mobile money
transfer transaction frequency and mobile money transfer deposit value are  available in the CBK while the same works
hand in hand with KNBS in making such statistics and estimation. Both
regression analysis and time series analysis will be used to analyze the data.
The scope of the study is to determine the effect of mobile money transfer on
small businesses in Kenya and which is reflected in the economic growth
experienced. The geographical scope of the study was Kenya.

data is modeled in time series. The analysis will be conducted through a
procedure of various steps. After successful data collection exercise, the
obtained data is verified and edited for completeness and consistency. A
content analysis and descriptive analysis will be employed. Tables and other
geographical presentations as appropriate will be used to present the data
collected for ease of understanding and analysis. Various assumptions are to be
carried out to find out the causal and effect of the variables between the
independent variables and dependent variables.(Mugenda,2003)