Cash handled by mobile money agents fell in 2023 for the first time since mobile payments were introduced in Kenya nearly 17 years ago, underlining the economic squeeze facing households and businesses.
Data from the Central Bank of Kenya (CBK) shows cash handled by agents in the 11 months to November 2023 stood at Sh7.165 trillion. This marks a decline of 0.5 per cent from Sh7.2 trillion during the same period in 2022.
It is the first time on record that mobile payments have declined on an annual basis, reversing year-on-year growth witnessed over 15 years.
Mobile transactions have grown exponentially each year since the M-Pesa service was first introduced by Safaricom in April 2007. Subscriptions to the service have since grown sharply, reaching 38.1 million in the first quarter of the financial year 2023/24, according to data from the Communications Authority of Kenya (CA).
“Mobile money subscriptions stood at 38.1 million, translating to a penetration rate of 75.2 per cent, which was an increase of 0.1 percentage points from the last quarter’s penetration rate,” said CA in its latest quarterly statistical bulletin.
The rapid adoption of the mobile payments service has been driven by its convenience, leading to the current situation where agents handle about 60 per cent of Kenya’s Gross Domestic Product.
Kenyans use mobile money to send money or make payments for day-to-day expenses. It is this widespread use that makes mobile payments a good barometer of how the economy is performing.
Kenyans have been struggling under a high cost of living amid steep rises in the cost of basic commodities such as food, fuel and electricity. The CBK has also kept interest rates high, removing excess liquidity from the hands of Kenyans.
The success of mobile payments has attracted the government, which sees it as a reliable source of tax revenues. Through the Finance Act, 2023, the government raised excise duty on mobile money transactions from 12 to 15 per cent, thus raising transaction costs.
Similarly, the government last year allowed Safaricom, Airtel Kenya and Telkom Kenya to raise their daily transaction limit to Sh500,000 from Sh300,000.
