Rural Kenya: the next frontier for your mobile money shop

Do you want to start a mobile money agency business? Well, perhaps you have bought the popular notion that it is in the big towns where the numbers and huge commissions are realised.

You are not mistaken. Even the companies that sign agents have for a long time relied on the number of people, who frequent the location of your shop, as a strong reason to grant agency business permits to applicants. This trend has, however, changed after being followed for far too long.

Rural areas and locations outside the main urban centres are not only the next frontier for agency business but have also proved to have a stronger business case according to the latest industry statistics.

The Agent Network Accelerator Survey report 2014 for Kenya shows declining revenue volumes from the agency business in towns from the 2013 survey.

That 76 per cent of all agents and 50 per cent of bank agents are found in Nairobi alone is narrowing space for agency business dealers in the city leading to lower transaction numbers and consequently their revenue.

COMPETITION

“While overall transaction figures stay relatively similar to 2013, agents in Nairobi continue to conduct the lowest number of median transactions, and there was a 10 per cent decrease in daily transactions in rural areas. Agents are still citing competition with other agents as the greatest limitation to expanding their business,” notes the report.

While 74 per cent of agents reported conducting more than 30 transactions per day in 2013, only 72 per cent in 2014 met the threshold signifying the shared transactions due to the growing number of agents. Those conducting over 50 transactions also dropped from 46 per cent to 40 per cent in the one-year period.

James Maingi began operating M-Pesa shop in Nairobi six years ago; he says a lot has changed since he opened his outlet on Tom Mboya Street. Apart from the number of competing agents increasing tenfold, he says, revenue declines have pushed him to diversify his enterprise.

“We used to have queues spilling onto the streets. We even had to separate deposits and withdrawal counters. Business was good and you could not even think of doing any additional businesses. Now we are forced to sell something else because if you just sit here waiting to transact, you may hardly raise the money needed to pay rent,” Mr Maingi told Money.

Mr Maingi is not alone, exclusivity dropped from 96 per cent in 2013 to 87 per cent last year. The decrease is accentuated in Nairobi: from 95 per cent exclusivity in 2013 to 80 per cent last year.

Non-dedication increased from 54 per cent in 2013 to 64 per cent last year, meaning more agents are diversifying their revenue streams.
Since 2013, banks have aggressively grown their agent networks in Kenya, decreasing exclusivity, fracturing the market more than ever before, and doing so, offering different services at the agent level.

Bank agents, who grew their market presence threefold in the past year to account for 15 per cent of the market presence in Kenya, increased most rapidly in Nairobi, jumping from under six per cent in 2013 to 24 per cent last year — a fourfold increase.

The opportunities are certainly bigger in the rural areas where most agents have very little or no presence especially for mobile service agents while profitability is on the increase, the MicroSave Survey shows.

While overall profitability for agents decreased by 10 per cent from 2013, non-Nairobi urban areas experienced a 26 per cent jump in profitability while rural areas had their profits rise by 45 per cent.

ARMED ROBBERY

“Profits in Nairobi have decreased by 20 per cent since 2013. This is likely correlated to the incursion of new agents setting up business in the capital. Non-Nairobi urban areas are now the most profitable location,” notes the report.

Agent dealers in Nairobi also cited dealing with customers when transactions go awry as a bigger concern than armed robbery, signifying the nature of customers they deal with in the city.

While 75 per cent of the population living in the rural areas, only 22 per cent of the agent network is available there; another reason why when you start thinking about opening an agency business, think rural.