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Kenya’s mobile money, M-Pesa increasing user’s savings – World Bank
However, its prevalence over other savings account, which offer interest pose a challenge to financial institutions to ensure they reward persons holding accounts with them.
“If the banks were rewarding the savers by offering more incentives then most people would move savings from mobile platforms, where they are not rewarded,” said Dr Mbui Wagacha a macro-economics consultant.
Current savings interest rates stand at an average 1.62 percent while the inflation rate is at 16.7 percent implying highly negative real interest rates for deposits with commercial institutions.
“Although some interest is better than none, if the rate of interest is very low compared to the inflation rate the possibility of interest may not matter much for savings decisions,” said the World Bank report.
Dr Wagacha points out that the mobile network operators are, however, mandated to hold trustee accounts with one or two commercial banks, from which they earn interest. The firms are meant to spend the interest earned on charity with the only issue being that the mobile money users do not have a say on the programme to be awarded.
Analysts hold that the use of the platform for savings does not impact cash availability for onlending in the money markets.
“When money goes to M-Pesa, physical money goes to banks or it is held by traders so it is still available for activity,” said Francis Mwangi, an analyst with Standard Investment Bank.
