Workers perception of M-pesa as a mode of salary payment in

Kenya

By Rwubahuka Jean Claude

A dissertation submitted in partial fulfillment of the

requirements of the Masters in International Business at
Amity Center for E-learning.

A m i t y U n i v e r s i t y , N o i d a

D e c e m b e r 2 0 1 1

Abstract
Many governments nowadays are leading the initiative of using information
technology to facilitate the modernisation of financial services, especially for
the poor and the unbanked. This has particularly brought into the existence
various innovations including the mobile money transfer services by different
mobile service providers.
Researchers around the world have discussed about the organisational impact or
the impact on the individual users of such services, but none has shown their
impact on employees, specifically with regard to their salary payment and
processes.
This research studies the particular case of Safaricom M-pesa and looks at the
issues from the point of view of the workers who receive their wages and
salaries through M-pesa.
It concludes that workers are willing to use mobile money transfer services, also
for their salary payments and needs. Requirements are simply to agree with
their employers and in some cases with Safaricom M-pesa office. They already
know how to use such a system especially that they were using the same to pay
for electricity and so many other bills.
However, there is still a problem as to who should bear the cost of transfers
because workers need assurances of their salaries reaching them safely and
intact.
Thus, many seem to disagree with their employers on the deductions made
automatically for the transfers made, sticking on the idea that the older
banking system they were used to did not charge them a penny for this kind of
transaction. Although they dont directly think of the other monthly charges
they used to pay, many of them still need to understand that M-pesa will also
bring about benefits most of which they would never have thought of.

Acknowledgements

The author would like to sincerely thank and acknowledge the following
contributors:
The Almighty God for his endless love and care;
The research project supervisor Arun Sacher;
The e-network project manager: Manoj Sharma;
The Manager, Center for e-Learning: Nishant Singhai;
The e-learning Rwnda project coordinator: Irenee Ndayambaje;
Distinguished authorities at Amity Universty and Kingali Institute of Education;
Different individuals who have contributed, in one-way or another, to the
accomplishment of this research;
Julia Mwangi, Financial services Officer at Safaricom M-pesa;
My friends and classmates including Murasira Gerard, Turyahikayo Peter,
Ngabonziza Jean DAmour, Umutesi Enestine, Kazarwa Sylvia and Kubwimana
Adeline.

ii

Table of Contents
Abstract ................................................................................................................................ i
Acknowledgements ........................................................................................................... ii
List of Tables .................................................................................................................... v
List of Figures .................................................................................................................. vi
CHAPTER 1. Introduction ............................................................................................ 1
1.1. Statement of the problem .............................................................................................. 1
1.2. Project rationale ................................................................................................................. 2
1.3. Project contribution .......................................................................................................... 3
1.4. Project objectives ............................................................................................................. 3
1.5. Research structure ........................................................................................................... 3
CHAPTER 2. Literature Review ................................................................................. 5
2.0. Introduction ........................................................................................................................ 5
2.1. An introduction to M-pesa .............................................................................................. 5
2.1.1. M-pesa defined ......................................................................................................................... 6
2.1.2. Registration to M-pesa ....................................................................................................... 6
2.1.3. How does M-pesa work ........................................................................................................ 7
2.1.4.The success of M-pesa ......................................................................................................... 8
2.1.5. Where does M-pesa keep clients money? ............................................................. 11
2.1.6. M-pesa users in millions from 2008 to 2011 ........................................................ 12
2.1.7. M-pesa Revenues in billions of Kenya Shillings from 2008 to 2011 ...... 12
2.1.8. M-pesa customers/Agents .............................................................................................. 13
2.1.9. M-pesa P2P Monthly Transactions (in Billions of Kenya Shilling) ........... 13
2.1.10. Economic impacts of M-pesa on households ...................................................... 15
2.1.11. The importance of M-pesa to the government of Kenya ............................ 17
2.1.12. Salary payments through M-pesa bulk mobile money transfer ............. 17
2.1.13. Financial inclusion using M-pesa bulk mobile money transfer ................. 17
2.1.14. Convenience and costs of M-pesa bulk mobile money transfer ............. 18
2.1.15. The importance of mobile money salary payments ........................................ 18
2.2. Employee compensation ................................................................................................ 19
2.2.1. Definition of compensation ............................................................................................. 19
2.2.3. Types of Compensation ..................................................................................................... 21
2.2.4. Need of Compensation Management ........................................................................ 25
2.2.6. Payroll management ............................................................................................................ 25
2.2.7. Methods of salary disbursement ............................................................................... 27
2.2.8. Salary payments through M-pesa bulk mobile money transfer ............... 27
CHAPTER 3. Research Methodology .................................................................... 29
3.1. Setting ................................................................................................................................ 29
3.2. Duration of study ........................................................................................................... 29
3.3. Sample size ....................................................................................................................... 29
3.4. Sampling technique ........................................................................................................ 30

iii

3.5.
3.6.
3.7.
3.8.
3.9.

Sample selection ............................................................................................................. 30

Data collection procedure ........................................................................................... 30
Procedure for data analysis ........................................................................................ 30
Tools for data collection .............................................................................................. 30
Research limitations ...................................................................................................... 30

CHAPTER 4. Presentation of Data ....................................................................... 32

4.1. Introduction ...................................................................................................................... 32
4.2. Sample size and response rate .................................................................................. 32
4.3. Data presentation ........................................................................................................... 32
CHAPTER 5. Analysis of Data ................................................................................ 36
CHAPTER 6. Discussion and Interpretation of Findings ............................ 44
6.1. Introduction ...................................................................................................................... 44
6.2. How people start using mobile money ..................................................................... 44
6.3. The trends under which employees use mobile money, their expectations
and perceptions about the service ................................................................................... 44
6.4. The views about M-pesa salary transfers ............................................................. 45
6.5. The advantages and disadvantages of mobile money ........................................ 45
6.6. The future of mobile money services ..................................................................... 45

CHAPTER 7. Conclusions, Implications and Recommendations ................ 46

7.1. Introduction ...................................................................................................................... 46
7.2. Review of research objectives .................................................................................. 46
7.3. Practical implications for business .......................................................................... 46
7.4. Recommendations for future research .................................................................. 47
References ....................................................................................................................... 48
Appendices ........................................................................................................................ 50

iv

List of Tables
2.1. Mobile subscriptions per operator
4.1. Number of respondents per age
4.2. Representation by gender
4.3. Representation by education levels
4.4. Representation by monthly salary
4.5. Representation by mode of salary payment
4.6. Classification by M-pesa usage
4.7. Classification by alterantive to M-pesa
4.8. Classification by usage time
4.9. Classification by reason for use
4.10. Rating of M-pesa salary transfer service
4.11. Classification by period of use
4.12. Classification per the advantages of M-pesa salary transfer service
4.13. Classification per gained satisfaction
4.14. Disadvantages of using mobile banking services
4.15. Suggested improvements in mobile money services

List of Figures
2.1. A typical M-pesa shop in Nairobi
2.2. Mobile operators subscriptions market share
2.3. M-pesa users per year
2.4. M-pesa revenue per year
2.5. M-pesa customers/agents
2.6. M-pesa P2P monthly transactions
2.7. How people sent money before and after M-pesa
2.8. Money transfer behavior before and after M-pesa
2.9. How people sent money after M-pesa
2.10. Direct compensation structure
2.11. Indirect compensation structure
2.12. Payroll process
5.1. Gender analysis
5.2. Age analysis
5.3. Education level analysis
5.4. Monthly salary analysis
5.5. Salary method analysis
5.6. M-pesa usage analysis
5.7. Alternative mobile banking service analysis
5.8. Usage period analysis
5.9. Other usage analysis
5.10. M-pesa salary transfer service rating analysis
5.11. Analysis of periods of use for M-pesa salary service
5.12. Analysis of preference for M-pesa salary service
5.13. Analysis of satisfaction from M-pesa salary service
5.14. Analysis of the disadvantages of mobile banking
5.15. Analysis of suggested improvements

vi

CHAPTER 1. Introduction
The main focus of this study is on the mobile money transfer services
mobile banking with emphasis on the use of mobile devices specifically
phones in transferring employee salaries. It analyses the usage behavior,
the services are provided, and ultimately when the user (the employee in
case) gets satisfaction.

and
cell
how
this

The technology of mobile phones is spreading very fast almost in every country
of the world, moving from the major cities to the farthest corners in the rural
areas.
The high diffusion rate of mobile phones coupled with the stability of mobile
communication technologies have greatly contributed to the enhancement of
mobile banking solutions in the provision of financial services in the world.
In Kenya, where the mobile money transfer development is ahead of that in any
other country of East Africa (Tanzania, Uganda, Burundi or Rwanda); Safaricom
has introduced M-pesa (whereby M stands for mobile and pesa is a Swahili
word for money) in 2005 and their target were the poor and the un-banked who
do not necessarily own a bank account.
Despite the above innovation by this telecom company, banks also offer mobile
services, generally by offering solutions as additive channels, hence customers
get a new door to the same services (or similar), as they would have received
over the counter.
To target on both sides, Safaricom had also introduced M-kesho, in partnership
with Equity Bank, to jointly offer bank accounts that are branded M-kesho; to
the users who become able to transfer money back and forth in between their
mobile M-pesa accounts and their bank accounts residing at Equity Bank [7.3].
Mobile money transfer (MMT) is offered by several providers in Kenya, but Mpesa is by far, at this time, the largest customer base and is covered more
extensively by background material.

1.1. Statement of the problem

While the world has known much in mobile banking development during the last
ten years; theres still a lot to be done to develop the mobile money transfer

services that are expected to improve the lives of many people, especially the
poor and the unbanked, in different countries of the world. Amongst the recent
developments in this field, there is the service of bills payment that allows,
among other things, to transfer money between accounts, as well as to pay
employees salaries. This being an innovative product and quite a new method of
salary disbursement; there are no existing studies to show its impact. Thus, the
current research investigates how it is done, the workers views about it, its
contribution; and also provides reasons as to why business operators should
invest in this technology and finally gives propositions for future researches in
this field.
Furthermore, we already know that this service of MMT is new and
consequently, not offered everywhere in the world. For example; (1) until today,
the office of financial management that is in charge of government salaries in
the USA, only recognizes check or warrant, direct deposit and payroll card as
the only accepted employee payments methods; and (2) until the end of 1999 in
India, many NGOs could only pay salaries by cheque or direct transfer to
employees bank accounts. In Rwanda, the MTN mobile money services are
currently being used mostly for peoples routine needs of money and to pay
electricity bills but in the mean time, the idea to transfer teachers salaries via
mobile money is being developed at the Teachers Credit and Savings
Cooperative-Umwalimu SACCO. Contrary in Kenya, the mobile money salary
transfer method is gaining popularity. Since the introduction of M-pesa, wages
and salaries have been being sent and received throughout Kenya, but this was
mostly in the small scale businesses or what are many times referred to as
informal sector; and this has captured my mind and incited me to start the
study and get to know more about this service.

1.2. Project rationale

Owing to the fact that pay satisfaction of an employee has consequences on

his/her performance, and that the methods used in paying salaries also play an
important role in this area; the researcher has given the rationale for this study
the interest in understanding the role of mobile money transfer (MMT) in
paying employee salaries.
I believe that this project research will contribute to the future researches
about the transformational services of money transfer and it will be valuable to
any organization that wants to utilize a new structure to distribute and transfer
salaries.

1.3. Project contribution

This project will highlight a new way of making money for the mobile operator
that is partnering with organizations to use it and emphasize its use in their
companies. It will also reveal the services that work as facilitator for the
employees and employers in salary administration and pay processes by helping
to increase work performance as no time will no longer be wasted in transferring
salaries for disbursement purposes or by the employees who used to line up in
queues at banks or cash points to confirm their salaries or make withdrawals,
and the ultimate advantage is that it will help increase the customer base and
user frequency for the mobile money (M-pesa) agents.

1.4. Project objectives

The following objectives are to be followed until completion of the current

project work.

To give reasons as to why people start using the mobile money transfer
services;

To identify the trends in usage of mobile banking by the employees while

focusing on their expectations;

To get, understand and analyze the views of workers who receive wages
and salaries through mobile money;

To investigate mobile money as a method of employee salary payment, its

advantages and disadvantages;

To point in the directions where mobile banking may evolve in the future;

Gather user data that is validated and can be used in future research by
others and me.

1.5. Research structure

Chapter 1 introduces the research projects to the readers with a clear

statement of the objectives and an overview of the industry and the
organization under focus.
Chapter 2 (literature review) shows what researchers have said about mobile
banking on one hand and employee compensation management (including methods
of salary payment) on the other hand.
Chapter 3 provides a research methods used while conducting the study in order
to achieve the research objective.

Chapter 4 presents the raw data collected from the field.

Chapter 5 analyses the data and assesses them for research results.
Chapter 6 discusses and interprets the findings while giving observations and
synthesizing the literature.
Chapter 7 gives conclusions, recommendations (for future studies) and
implications of the findings to the organization and the community concerned.

CHAPTER 2. Literature Review

2.0. Introduction

This chapter critically reviews the literature that pertains to the developments
in Safaricom M-pesa and the ultimate use of the latter in paying salaries in
Kenya. The current literature begins by defining and describing M-pesa in
details, and then discusses the different modes of salary payment; including Mpesa. The structure of this literature review was designed to discuss M-pesa
context and its concept as a mobile money transfer (MMT) service and its
applicability in salary payments in order to understand the relevance of the
research model and main construct of the study.

2.1. An introduction to M-pesa

Mobile money is one of the worlds fastest growing industries, common
worldwide, but yet to become established in India.
The explosive growth of the mobile industry over the past two decades has led
to billions of transactions using mobile devices.
People now buy train tickets, goods from Amazon and their groceries with their
devices.
Such mobile payment offerings are influenced by two distinct sets of entities.
Firstly we have those entities whose core business is in handling payments.
Examples include traditional retail and corporate banks, established payment
brands and processors such as VISA and MasterCard and established non-banks
such as PayPal, Obopay and new fast growing entities such as Paythru.
Secondly we have the telecoms industry. Mobile operators, technology providers
and hardware providers have all recognized the vast potential offered by mobile
money and are allocating substantial resources to the industry.
Mobile money systems are very common in the US, Europe, Asia and Africa.
Even China has been quick to implement systems such as SmartPay, UnionPay and
mobile banking.

Probably the most successful method of mobile money transfer exists in Kenya
and which is the M-pesa system owned by the leading mobile operator
Safaricom.
M-pesa was launched in 2007 by Safaricom and allows four basic types of
transactions person to person, bill payments, cash withdrawal and
microfinance receipts and payments.
Users can transfer money subject to a maximum and minimum amount and also
hold a balance on their M-pesa account, again subject to a maximum amount.

2.1.1. M-pesa defined

M-pesa is a combination of two words: M standing for mobile and pesa, a

Swahili word meaning money. M-pesa was introduced by Safaricom in Kenya, in
March 2007 but was initially developed by Vodafone, a mobile phone operator in
the UK. It is a system that works as an electronic payment and store of value
for mobile phones.
M-pesa is known worldwide of its services to the Kenyan community in east
Africa. In their issue, The World in 2012, The Economist pointed out that it
is easier to use your mobile phone to pay for a taxi in Nairobi than in New York.
That is because Kenya is a world leader in mobile-payment systems, which have
proved particularly popular in the developing world as an alternative to
conventional banking and payment methods.

Figure 2.1: A typical M-pesa shop in Nairobi. Source: Safaricom website

2.1.2. Registration to M-pesa

To become an M-pesa user, customers have to register at an authorized agent

or M-pesa retail outlet who gives them an account linked to their phone number
and a secret code to effect their personal transactions with M-pesa. These
range from routine deposits and withdrawals to and from their accounts, all
through the network of retail outlets also known as agents. They can also
transfer money from account to account, even to non-registered mobile phone
numbers.
Additionally, they are able to pay bills, buy airtime, purchase products and
services, all to the maximum of 70,000 Kenya Shillings. However, this
transaction limit is only for individual users of M-pesa. As for the institutions,
theres a service called M-pesa corporate solutions that caters specifically for
companies and their transaction limits are higher than individual accounts.
Furthermore, these corporate solutions are also sub-divided into Customer to
Business (C2B for pay Bill Services) and Business to Consumer (B2C for Bulk
Payments Services such as wages and salaries). A point worthy being noted here
is that the salary payments fall under the M-pesa B2C. This is where
organizations are enabled to send money (such as promotional, dividend, salary
payments, etc.) to many people who may be widely dispersed; whereas M-pesa
C2B is where organisations are enabled to receive payments from their
customers for the goods and services rendered.
2.1.3. How does M-pesa work

M-pesa works in a way similar to other banks by providing transactions such as

accepting deposits, facilitating cash withdrawals as well as transfers from one
M-pesa account to another or simply from any Safaricom subscriber, even to
some bank accounts such as debit card accounts of KCB-Kenya Commercial Bankand M-KESHO accounts at Equity bank. Furthermore, depositing money at Mpesa is free of charge and the charges for the other transactions are very
minimal compared to the usual bank charges (ref. Safaricom website).
An example of M-pesa transaction:
1. Paul buys 2,000 at Nairobi Agent
2. Paul sends it to Mother
3. Mother cashes 2,000 at Mombasa Agent
Nairobi Agent
98,000 KES (in float)
Mombasa Agent
Pays out the 2,000 KES

Paul
Mother

From the above table, we see that there is a system of internal compensation
within M-pesa that facilitates transactions and makes them quick. The Central
Bank of Kenya-CBK- provides an oversight of M-PESA in 3 ways:
CBK was consulted from pilot stage and judged M-pesa to full commercial
launch;
CBK is continuously consulted on innovation;
Safaricom provides monthly statistics reports to CBK.

2.1.4.The success of M-pesa

The success of M-pesa is viewed in different ways but the most important will
be discussed in the following sub-points.
2.1.4.1. M-pesa partners with Western Union
Safaricom has moved to capture a larger share of the international remittances
market through a new partnership with Western Union that will allow people in
45 countries to send money directly to M-Pesa accounts. The initiative extends
a three-year relationship that Safaricom has had with the international
remittances firm, allowing both to target the over $640 million sent home by
Kenyans abroad each year. The move allows both firms to tap into the growing
remittances market, a growth market that witnessed an increase of 42 per cent
growth in 2010.
The Central Bank of Kenya says the improved performance reflects continued
economic recovery in source markets and a favorable domestic economic
environment.
Traditionally, Kenyas source markets for remittances have remained North
America and Europe, which contributed an average of 54 per cent and 27 per
cent respectively in 2010.
Remittance inflows in February 2011 rose 31 per cent to Sh5 billion up from
Sh3.8 billion at the same period last year, reflecting economic recovery in the
source markets.
The beginning of the year saw the highest remittance inflows since 2004
according to official data from the Central Bank.
However, the very recent news indicates that M-pesa has now surpassed
Western Union in figures. According to the IMF, M-Pesa now processes more
transactions domestically within Kenya than Western Union does globally, and

provides mobile banking facilities to more than 70 per cent of the countrys
adult population.
2.1.4.2. The Safaricom market share
After the introduction of mobile number portability (MNP) in Kenya on the 1st of
April 2011, Safaricom retained a market share as a leader with 69.9 percent of
subscribers, followed by Airtel with 15.2 percent, then Orange with 8.5% and Yu
(also known as Essar) with 6.4%.
Figure 2.2. Mobile operators subscriptions market share 2010

Data on the graph above can be detailed in the table below:

Table 2.1. Mobile subscriptions by operator

The success of M-pesa is mainly rested in the trust that people have in
Safaricom as one of the biggest and well respected private companies in Kenya.

2.1.4.3. Bridging the gap between the rich and the poor
According to Greg Reeve, the head of mobile payment solutions at Vodaphone;
the M-PESA product is aimed at the mass market within the country, as both
banked and unbanked will benefit from the increase convenience M-PESA offers
for transferring money, buying airtime and paying bills. This is important as MPESA is all about financial inclusion so providing service to both the rich and
poor and often connecting the two! The primary function of M-PESA, at least as
it was conceived from the start, is to reduce the costs of making remittances
from one individual to another, especially across large distances.
2.1.4.4. M-pesa Branding
Another success of M-pesa derives from the fact that Safaricom built a very
strong service brand for M-PESA, which rode on strong customer sense of
affinity with and trust in the operator. From the very beginning, Safaricom
knew it had to develop customer trust in the new payment mechanism, and
understood it needed to get critical mass quickly in order for existing customers
to be the prime mechanism to draw in new customers. This was helped by a
rapidly expanding base of retail stores, which carried the M-PESA brand very
visibly into the heart of communities where people worked and congregated.
Heavy advertising focused on the key customer need M-PESA was addressing
also supported it.
2.1.4.5. Channel management
Safaricom effectively leveraged its extensive network of airtime resellers to
build a reliable, consistent store network that served customers needs.
Safaricom understood that the primary role of the mobile phone is to enable the
creation of a retail outlet-based channel for cash-to-digital value conversion.
Senior managers drove the development of a fully managed retail channel very
strongly. Business ethics are the same throughout the network. Stores acting
have very consistent branding, received substantial on-the-spot training, and
were frequently visited and supervised. Thus, the way of doing business is also
the same in all the M-pesa agent shops that are now found almost everywhere in
Kenya.

10

2.1.4.6. Pricing:
Safaricom designed a pricing scheme for both customers and stores that
provided incentives for both to join M-PESA early on. Customer pricing was
designed to encourage customers to experiment with the service: free and quick
registration to the service, free deposits, and ability to send money to any
mobile phone subscriber whether they were subscribed to the service.
Safaricoms profit margin is loaded on P2P transfer fees rather than on the
cash in/cash out fees, reflecting that customer willingness to pay is higher for
remote payments where customers alternatives are weakest. Stores receive
new customer registration bonuses, which not only incentivized growth but also
provided good cash flow to stores in the early days while transaction volumes
were low.
2.1.4.7. M-pesa goes international
The success of M-pesa in Kenya has led Vodafone (majority owners of
Safaricom) to launch M-Pesa in other markets. To date, it has been rolled out in
neighboring Tanzania, Afghanistan as well as South Africa, with pilots in other
countries including India.

2.1.5. Where does M-pesa keep clients money?

M-pesa money is securely kept in banks and in order to facilitate clients

transactions, M-pesa requires that each agent holds a bank account that help
them to purchase e-floats from Safaricom or transfer confirmations in
exchange of clients deposits. The e-floats and transfers are all transacted
from agents and clients cell phones and the money to pay out is kept at the
agents shops or outlets. This money is again taken to the banks by agents in
case of cash excess or close of business at day-end and then withdrawn again by
the same agents every time theres a cash need or before starting daily
businesses.
Then, according to the central bank of Kenya, M-pesa deposits at the banks are
ensured under the Deposit Protection Fund to the maximum of KSH 100,000 and
these help in reducing cash in circulation to the extent that banks comply with
the official reserve requirement.
It was at the very beginning of M-pesa services that M-peasa Holdings limited, a
branch or department of Safaricom Limited, released or publicized a trust
deed in favor of all M-pesa subscribers (a copy of this is placed in Appendices)
and it generally details all the information about the way, the procedures and all
the matters about the customers money kept by M-pesa Holdings (refereed
therein as the trustee). For example in its point 1.19, it is very well defined that

11

the Trustee Fund relates to all the money the Trustee or M-pesa Holdings) get
from customers plus or minus any transaction fees. Again in point number 5, it
clearly states that the Trust Fund (all the customers money) shall be held in
comercial bank accounts and such Government of Kenya securities as the
Trustee shall in its absolute discretion determine, and that its expressly agreed
that any interest received in respect of that investment (in government
securities) shall be retained by the trustee for its own account to defray the
costs of administering the Trust Fund and operating the M-pesa accounts and
for such other porposes as the Trustee may in its sole discretion determine.
The above process is also highlighted by the economist, as the beauty of MPESA, for those who would like to see competition with bank-sponsored payment
systems, is that no bank is involved except as a holder of the float. In theory,
the European Commission is encouraging similar competition with its new
payment-services directive (PSD), due to come into force in 2009. The PSD
foresees the development of non-bank payment institutions which need no
banking license if their activities are restricted, though of course they would be
subject to anti-money-laundering controls.

2.1.6. M-pesa users in millions from 2008 to 2011

Figure 2.3: M-pesa users per year. Source: 2011 Report, pg. 8
2.1.7. M-pesa Revenues in billions of Kenya Shillings from 2008 to 2011

12

Figure 2.4: M-pesa revenue per year. Source: 2011 Report, pg. 8

2.1.8. M-pesa customers/Agents

Figure 2.5: M-pesa customers/agents. Source: 2011 Report, pg. 10

According this report, M-pesa users have increased to a total of 13.8 million
users in March 2011 and the agent network had expanded to a total of 26,948
agents countrywide.

2.1.9. M-pesa P2P Monthly Transactions (in Billions of Kenya Shilling)

13

Figure 2.6: M-pesa P2P monthly transactions. Source: 2011 Report, pg. 10
This picture shows that M-pesa Person-to-person transactions stood at Kshs. 47
billion in March 2011, and the cumulative value of transactions from inception
was Kshs. 828 billion.

Figure 2.7: How people sent money before and after M-pesa. Source M-pesa
Kenya; FSD-KENYA (2006) and FSD-Kenya (2009)
In 2006, a bigger portion of the people who were sending money in Kenya did it
by hand while others sent it by other ways such as bus, post office, direct
deposits, money transfer, cheque and through other people respectively.
After the introduction of M-pesa, like in in 2009 on the figure above, almost
everyone was sending money by M-pesa; which made other ways start to
disappear.

14

Figure 2.8: Money transfer behavior before and after M-pesa

Source: safaricom website

Figure 2.9: How people in Kenya sent money after the introduction of M-pesa

Source: Safaricom
In terms of financial transactions performed within Kenya, M-pesa is currently
ahead of all that are available on the market. About 70 percent of financial
transactions in Kenya are now handled by M-PESA, which is a ubiquitous venue
for paying utility bill, water purchases, farm equipment purchase, payroll, goods
and services and international money transfer. In a nutshell, M-PESA is the
most successful mobile money transfer service in the developing world.
M-PESA is the most popular money transfer service. It has made money
transfer affordable, safe and fast for the users.
2.1.10. Economic impacts of M-pesa on households
M-PESA facilitates the safe storage and transfer of money. As such, it has a

15

number of potential economic effects. First, it simply facilitates trade, making

it easier for people to pay for, and to receive payment for, goods and services.
Electricity bills can be paid with a push of a few buttons instead of traveling to
an often-distant office with a fistful of cash and waiting in a long queue;
consumers can quickly purchase cell phone credit (airtime) without moving; and
taxi drivers can operate more safely, without carrying large amounts of cash,
when they are paid electronically.
Second, by providing a safe storage mechanism, M-PESA could increase net
household savings.
Third, because it facilitates inter-personal transactions, it could improve the
allocation of savings across households and businesses by deepening the personto-person credit market. This could increase the average return to capital,
thereby producing a feed-back to the level of saving.
Fourth, by making transfers across large distances trivially cheap, M-PESA
improves the investment in, and allocation of, human capital as well as physical
investment. Households may be more likely to send members to high-paying jobs
in distant locations (e.g., the capital), either on a permanent or temporary basis,
and to invest in skills that are likely to earn a return in such places but not
necessarily at home.
Fifth, M-PESA could affect the ability of individuals to share risk. Informal
risk-sharing networks have been found to be an important, although not fully
effective, means by which individuals spread risk, making state-contingent
transfers among group members. By expanding the geographic reach of these
networks, M-PESA may allow more efficient risk sharing, although the riskreducing benefits might be mitigated due to issues of observability and moral
hazard when large distances separate parties.
Sixth, a further risk-related effect arises if M-PESA facilitates timely
transfer of small amounts of money. Instead of waiting for conditions to worsen
to levels that cause long-term damage, M-PESA might enable support networks
to keep negative shocks manageable. For example, a household head with access
to M-PESA who suffers a mild health shock might receive a small amount of
money via M-PESA that allows him to keep his children in school. If this money
was delayed, or the sender waited until the recipient really needed it, the
children might have quit school, the effects of which may be hard to reverse.
Seventh, if M-PESA allows households to spread risk, they may be led to make
more efficient investment decisions, avoiding the trade-off between risk and
return that they would otherwise face.
M-PESA could conceivably alter bargaining power and weaken incentives within

16

households or other networks. Economically weaker family members might

expect larger and more regular remittances from better-off city-dwelling
relatives, who themselves might find it hard to justify not sending money home.
This could weaken incentives for rural household members to work or innovate,
offsetting some of the efficiency-enhancing benefits of improved geographic
labor allocation and risk sharing.
Conversely, M-PESA could have the effect of empowering certain household
members who have traditionally had less bargaining power, in particular women.
Especially among poorer segments of the population, remittances and transfers
received (and sent) via M-PESA are less visible than those transmitted by other
means, such as delivery by a friend or relative. Granted this information
advantage, recipients could be in a position to keep more of the funds they
receive.
2.1.11. The importance of M-pesa to the government of Kenya
This importance is now very well recorded. In 2010 an estimated US$7 billion
(equivalent of 20% of Kenyas GDP) was transferred through M-Pesa. The
platforms success has led to the launch of various other similar services.
Currently, more than a quarter of Kenya's GDP now passes through a phone-tophone network called M-pesa, and in Uganda MTN MobileMoney has almost two
million users. As Cameron put it in a speech to Lagos Business School, "Today,
mobile banking systems mean we can cut out middlemen and make a direct impact
on the lives of small farmers who can produce more food, feed their families,
sell more food at the market and in turn buy more seed."
2.1.12. Salary payments through M-pesa bulk mobile money transfer
M-pesa bulk mobile money transfer is designed mainly for corporate entities.
The money transfer may be used to pay salaries to employees who do not even
have bank accounts. This makes this banking channel very convenient both for
the corporate and the employee. The mode of transfer is simple and fast.
2.1.13. Financial inclusion using M-pesa bulk mobile money transfer
Reaching the unbanked was a target for money transfer services and M-pesa
bulk mobile mobile transfer or payment service is achieving this. M-pesa has a
very wide reach in the Kenya and neighbouring countries. In Kenya, M-pesa
agents are found in all parts of the country. The money is transferred to a cell
phone and not an account and there are more people with mobile phones
compared to those with bank accounts. The money may remain in the M-pesa
account for use when it is required or it may be cashed when cash is required.

17

2.1.14. Convenience and costs of M-pesa bulk mobile money transfer

Since the funds are sent to the M-pesa bulk mobile transfer or payment service
by the click of a button, the speed of transfer is very fast. When the networks
are down, the transfer may take a while to reach the recipients.
Unlike banks that close their doors at some time at the end of the day, M-pesa
bulk mobile transfer service is available to the users twenty-four hours a day,
every day. The recipient can look for an all night M-pesa agent or an ATM that
accepts M-pesa transactions, to cash the funds if need be.
Since cash is sent to bulk recipients, the audit of the funds sent becomes easier
and the recipients do not have to carry cash in their pockets but can use M-pesa
as an account and save their monies. When a cell phone is stolen, funds do not
get stolen since the actual cash is not on the phone and a PIN is required to
transfer funds. This makes this solution safer than cash payments.
Operating costs for M-pesa bulk mobile money transfer services are
competitive. Banks charge less for M-pesa bulk mobile transfers compared to
the costs of cheques and cash transfers.
The Business Payments feature allows a business to pay a number of customers
or employees through their M-PESA accounts. This service was originally
introduced at the request of Safaricoms temporary staff working in rural
areas. These low-income workers previously had to travel to a Safaricom office
in the nearest town to pick up their paychecks and deposit them into bank
accounts; it was a time-consuming activity at best. Now they receive their wages
directly through their M-PESA accounts. It has proven so popular that the
organization recruited to provide M-PESA training to new agents around Kenya
actually started to use the payment feature for its own staff expenses. Many
other companies are now using M-PESA to pay field operatives working remotely
from regional offices. Safaricom also recently offered shareholders the
opportunity to receive their annual dividend payments via M-PESA; many
thousands of Kenyanswho had become first-time shareholders when Safaricom
issued public shares in 2008accepted the offer.
2.1.15. The importance of mobile money salary payments
Mobile money services may be able to deliver gains in transparency,
accountability and savings in the salary payment process. Paying salaries to
through mobile phones could help diminish corruption down the payment chain,
and potentially increase the workers salaries.
In 2009, Roshan, an Afghani mobile operator, tested M-Paisa to pay salaries for
a small group of Afghan National Police. In that year, the Afghan National Police
began to pay salaries through mobiles (using a text and Interactive Voice

18

Response system), rather than in cash. The platform used was based on the MPesa service that has become highly successful in Kenya. Branded M-Paisa in
Afghanistan, it was introduced by the operator Roshan in partnership with the
Ministry of the Interior (MOI) and had an immediate effect The Afghan Police
are not the only people to be paid this way. All of Roshans employees are paid by
M-Paisa and consequently Afghanistans economy is beginning to benefit as the
currency seeps through to the correct people and not the corrupt middlemen.
Local stores have effectively become banks and the finances of Afghans who
used to carry cash around the country are infinitely more secure.
Other news from Kenya (February 2011) said that Over 13,000 sugarcane
cutters in Mumias Sugar zone will start receiving their pay electronically
following a deal between Mumias Sugar Company, Family Bank and mobile phone
money transfer service providers. Acting harvesting and transport manager Mr
Franklin Maguge said the firm was considering the possibility of extending the
programme to cover other casual workers in the next one month. He said that by
paying them through M-pesa and Zap, beneficiaries would receive their money
conveniently and timely compared to the old system where it took several weeks
for the payment to be processed manually because of logistics involved.
Furthermore, another news goes This simple, person-to-person, mobilepayment method has evolved into a financial tool for both individuals and
businesses. Over one million people now pay their monthly bills through the Pay
Bill function, larger corporations have started paying their workers salaries
through these accounts, and it has proved a safer option for informed traders
dealing with cash. There are plans to expand the program to Tanzania,
Afghanistan, India, Egypt, and South Africa.
2.2. Employee compensation
2.2.1. Definition of compensation
Compensation is the remuneration received by an employee in return for his/her
contribution to the organization. It is an organized practice that involves
balancing the work-employee relation by providing monetary and non-monetary
benefits to employees. Compensation is an integral part of human resource
management, which helps in motivating the employees and improving
organizational effectiveness.

2.2.2. Components of Compensation System

Compensation systems are designed keeping in minds the strategic goals and
business objectives. Compensation system is designed on the basis of certain
factors after analyzing the job work and responsibilities. Components of a
compensation system are as follows:

19

Job analysis
This is a process of establishing and documenting the 'job relatedness' of
employment procedures such as training, selection, compensation, and
performance appraisal.
Pay structures
Pay structures, also known as salary structures, set out the different levels of
pay for jobs, or groups of jobs, by reference to:

Their relative internal value, as established by job evaluation

External relativities, via market rate surveys

Where appropriate, negotiated rates for the job

The main characteristics of Pay Structures are to:

Indicate rates of pay for different jobs

Provide scope for pay progression via performance, competence,
contribution, skill or service
Contain pay ranges for jobs grouped into grades, individual jobs or job
families.

Organizations need Pay structures in order to:

Establish a logically-designed framework within which equitable, fair and

consistent reward policies can be implemented
Determine levels of pay for jobs and people
Basis for the effective management of relativities
Help monitor and control the implementation of pay practices
Communicate the pay opportunities available to employees.
Salary surveys

Salary Surveys are tools used to determine the median or average compensation
paid to employees in one or more jobs. Compensation data, collected from
several employers, is analyzed to develop an understanding of the amount of
compensation paid. Surveys may focus on one or more job titles, geographic
regions, employer size, and or industries. Salary surveys may be conducted by
employer associations (e.g., SHRM), survey vendors, or by individual employers.
Survey data is often time sensitive and may become out-of-date quickly.
Because of the time sensitive information, surveys are often identified by the
year or quarter in which the data was collected. The purpose of salary surveys
provides a means for comparison of salaries at the company.

20

Salary Surveys are analyses of compensation data. This data may include
quantifiable aspects of compensation such as
Base salaries

Increase percentages or amounts

Merit Increases

Salary Ranges

Starting Salary

Incentives/Bonuses

Allowances and Benefits

Working Hours

Salary Surveys may also include non-quantifiable aspects of compensation such

as:

Educational Requirements
Geographic Location
Source of Hire (Internal/External)
Working Conditions

2.2.3. Types of Compensation

Compensation provided to employees can direct in the form of monetary
benefits and/or indirect in the form of non-monetary benefits known as perks,
time off, etc. Compensation does not include only salary but it is the sum total
of all rewards and allowances provided to the employees in return for their
services. If the compensation offered is effectively managed, it contributes to
high organizational productivity, which is the goal for all companies.
2.2.3.a. Direct Compensation
Direct compensation refers to monetary benefits offered and provided to
employees in return of the services they provide to the organization. The
monetary benefits include basic salary, house rent allowance, conveyance, leave
travel allowance, medical reimbursements, special allowances, bonus,
Pf/Gratuity, etc. They are given at a regular interval at a definite time
Basic Salary
Salary is the amount received by the employee in lieu of the work done by
him/her for a certain period say a day, a week, a month, etc. It is the money an
employee receives from his/her employer by rendering his/her services.

21

House Rent Allowance

Organizations either provide accommodations to its employees who are from
different state or country or they provide house rent allowances to its
employees. This is done to provide them social security and motivate them to
work.
Conveyance
Organizations provide for cab facilities to their employees. Few organizations
also provide vehicles and petrol allowances to their employees to motivate them.

Figure 2.10: Direct compensation structure. Source: hr-survey.com

Leave Travel Allowance
These allowances are provided to retain the best talent in the organization. The
employees are given allowances to visit any place they wish with their families.
The allowances are scaled as per the position of employee in the organization.
Medical Reimbursement
Organizations also look after the health conditions of their employees. The
employees are provided with medi-claims for them and their family members.
These medi-claims include health insurances and treatment bills

22

reimbursements.
Bonus
Bonus is paid to the employees during festive seasons to motivate them and
provide them the social security. The bonus amount usually amounts to one
months salary of the employee.
Special Allowance
Special allowance such as overtime, mobile allowances, meals, commissions, travel
expenses, reduced interest loans; insurance, club memberships, etc are provided
to employees to provide them social security and motivate them which improve
the organizational productivity.
2.2.3.b. Indirect Compensation
Indirect compensation refers to non-monetary benefits offered and provided to
employees in lieu of the services provided by them to the organization. They
include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance,
Leave travel Assistance Limits, Retirement Benefits, Holiday Homes.
Leave Policy
It is the right of employee to get adequate number of leave while working with
the organization. The organizations provide for paid leaves such as, casual
leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc.

Overtime Policy
Employees should be provided with the adequate allowances and facilities
during their overtime, if they happened to do so, such as transport facilities,
overtime pay, etc.
Hospitalization
The employees should be provided allowances to get their regular check-ups, say
at an interval of one year. Even their dependents should be eligible for the
medi-claims that provide them emotional and social security.

23

Figure 2.11: Indirect compensation structure. Source: hr-survey.com

Insurance
Organizations also provide for accidental insurance and life insurance for
employees. This gives them the emotional security and they feel themselves
valued in the organization.
Leave Travel
The employees are provided with leaves and travel allowances to go for holiday
with their families. Some organizations arrange for a tour for the employees of
the organization. This is usually done to make the employees stress free.
Retirement Benefits
Organizations provide for pension plans and other benefits for their employees,
which benefits them after they retire from the organization at the prescribed
age.
Holiday Homes
Organizations provide for holiday homes and guesthouse for their employees at
different locations. These holiday homes are usually located in hill station and

24

other most wanted holiday spots. The organizations make sure that the
employees do not face any kind of difficulties during their stay in the
guesthouse.
Flexible Timings
Organizations provide for flexible timings to the employees who cannot come to
work during normal shifts due to their personal problems and valid reasons.

2.2.4. Need of Compensation Management

A good compensation package is important to motivate the employees to
increase the organizational productivity.
Unless compensation is provided no one will come and work for the organization.
Thus, compensation helps in running an organization effectively and
accomplishing its goals.
Salary is just a part of the compensation system, the employees have other
psychological and self-actualization needs to fulfill. Thus, compensation serves
the purpose.
The most competitive compensation will help the organization to attract and
sustain the best talent. The compensation package should be as per industry
standards.
2.2.5. Strategic Compensation
Strategic compensation is determining and providing the compensation packages
to the employees that are aligned with the business goals and objectives. In
todays competitive scenario organizations have to take special measures
regarding compensation of the employees so that the organizations retain the
valuable employees. The compensation systems have changed from traditional
ones to strategic compensation systems.

2.2.6. Payroll management

Payroll is defined as a method of administrating employees salaries in the

organizations. The process consists of calculation of salaries and tax deductions
of the employees, administrating the retirement benefits and disbursements of
salaries to employees. It can also be called as an accounts activity, which
undertakes the salary administration of employees in the organization.

25

Administrating the employees salaries is not an easy task, the HR and accounts
department work together to calculate and disburse the salary to the employees.
Thus, payroll management can be further subdivided into two sub processes, i.e.
Payroll accounting and payroll administration.
Payroll Accounting
Payroll accounting involves calculations of employees salaries and tax
deductions. It also undertakes the activities such as preparation of tax returns,
maintaining the payroll records, etc.
Payroll Administration
Payroll Administration involves managerial activities such as maintaining
employees records, referring employment laws. Here, the HR comes into picture
which maintains the daily record if employees attendance.
Payroll process

Figure 2.12: Payroll Process. Source: hr-survey.com

26

Database of employees is maintained. Employees details such as name, employee

ID, basic salary, daily attendance, etc are recorded. Gross Salary is calculated
after adding the allowances and incentives to the basic salary of the employee.
Net salary is calculated by deducting the tax and other calculated deductions
(loan installments, etc.).
2.2.7. Methods of salary disbursement
Governments and institutions around the world pay their employees salaries by
account transfers, cheques and/or cash. These methods are different and their
use depends on the type of company, decision of the salary administration office
or the kind of work to be performed. However, bank transfers seem to be the
ost popular way of salary disbursement in many institutions just because its
secure and almost all the disbursement job is done at the bank by transferring
salaries from the companys account to the individual employees account. Also
payment by cheque or bank transfer always carries more credibility than
payment in cash because of the security involved while currying sums of money
by the employers but mostly the employees because the latter dont have
security guards or safe boxes to transport the money.

2.2.8. Salary payments through M-pesa bulk mobile money transfer

M-pesa bulk mobile money transfer is a service designed mainly for corporate
entities. In July 2011, Safaricom said that 300 organizations were already using
M-PESA
for
salary
payments
and
other
disbursement
services. The money transfer may be used to pay salaries to employees who do
not even have bank accounts. This makes this banking channel very convenient
both for the corporate and the employee. The mode of transfer is simple and
fast. With this service, employers can manually disburse salaries through an
interface or automatic disbursement set up in a computer at regular intervals.
When a salary is disbursed, the employee receives an SMS notifying him that
his salary has been sent to his M-pesa account.
Using their mobile phone to sign transactions securely, the employee can spend
their money securely by going at point of sales/agents, pay bills or buy airtime
using the money in their M-pesa account, transfer money to another persons
cell phone via a cell number and withdraw cash from an ATM or cash-out point.
The phone must be present to authorize the transaction using their secret
codes.
The Business to Consumer service enables organizations to send money by MPESA to many people who may be widely dispersed. The service targets
organizations that would like to do promotional payments, field staff
disbursements, salary disbursements, and dividend payments among others. Bulk
payment service is easy to use and is being improved further to cater forever-

27

growing market requirements.

The service has been taken up by organizations with field-based staff such as
East African Breweries, social payment organizations like Concern Worldwide
among others. The bulk payment facility has already been beneficial to clients,
providing a quick way of sending funds to their beneficiaries.
The service is also secure and does not require the organization to travel with
cash to the areas of disbursement. The service is cost effective when compared
to other cash management services. In order for companies to open an M-PESA
Corporate Account that disburses salaries and other payouts, they just write to
the M-PESA Corporate Solutions office on e-mail m-pesa@safaricom.co.ke
Currently one of the biggest companies for the Salary Transfer service is
Mwalimu Credit and Savings Sicoety whereby Mwalimu National Sacco has
partnered with Safaricom Ltd and CoreTec Systems & Solutions to offer Mobile
Phone money Transfer Services (Mwalimu PESA) facility.
The Services Offered include Balance inquiry, account to M-PESA account
deposits, account from M-PESA account transfer, etc. and one of the main
requirements for subscription is an M-PESA Account.

28

CHAPTER 3. Research Methodology

This project research involves the study of available and necessary literature
about mobile money on one hand and the methods of salary payment or
disbursement on the other hand. The needed information is available in books,
websites, journals and newspapers.
These literature resources serve as an information base for this research. Deep
dives and direct observations at the field were also done while compiling data
for the research. In addition to that, interviews have been conducted (some adhoc, others with the focus groups and others with experts in the business) and
questionnaires distributed to gather data that has to be analyzed and
interpreted later on.

3.1. Setting

This project research was conducted in Nairobi, the capital city of Kenya. In
this place, transportation is very easy and many businesses can be localized
without any problem. Apart from the city center, other specific areas visited
include but not limited to West-lands, Upper-hill, Kibera slams, Dagoretti,
Kawangware and Karen; the latter being the furthest from the city center with
approximately 1h30 minutes drive without traffic.

3.2. Duration of study

This research project was conducted between September and December 2011.
The schedule for this project was flexible and could be adjusted as the
research was progressing.

3.3. Sample size

While the population for this project research is all employees from all
enterprises in Nairobi that use M-pesa to pay bills and those that use it
specifically to transfer salaries, the data collection was focusing on a group of
120 respondents from only 30 enterprises. According to Zikmund (2003, p. 423),
sample size has a direct influence over the accuracy of the research findings.

29

3.4. Sampling technique

The technique used in this research is simple random sampling. This gives all the
respondents equal chances of being interviewed, but it also facilitates research
with limited time and resources.

3.5. Sample selection

The basic idea of sampling is that by selecting some of the elements in a
population, conclusions can be drawn about the entire population (Zikmund, 2003,
p. 369).
From the companies that constitute the population for this research, each and
every one of them had the same probability of being selected and, all employees
from those companies also had equal chances of being selected for interview.

3.6. Data collection procedure

Despite secondary data that was gathered through books, journals, etc., primary
data for this project research was collected using both interviews and
questionnaires. Safaricom M-pesa offices were visited, M-pesa agents contacted
without problems as they are seen everywhere in Nairobi and blogs about Mpesa were followed and consulted such as thinkm-pesa.com, m-pesa tweeter
page and kachwachwa.com.

3.7. Procedure for data analysis

At the time of analyzing collected data; charts, tables and diagrams from Excel
(MS office program of computer) were used to analyze and present them
accordingly.

3.8. Tools for data collection

Apart from the visits made and person-to-person interviews conducted, a
questionnaire was designed and used as an important instrument to collect data
for this research. A sample questionnaire that was used is in annexure for
perusal.
3.9. Research limitations
While compiling data for this research, certain problems were encountered
such as where some respondents were reluctant to provide information and

30

others perceived it as wastage of their time. To overcome this, co-workers and

friends had to be searched and used in order to reach the respondents. It was
also not easy to access the Safaricom twin buildings because of tight security
and many unsuccessful appointments. The solution to this was nothing but too
much insisting and using e-mails and telephone as an option for personal contact.

31

CHAPTER 4. Presentation of Data

4.1. Introduction

This chapter presents the results of the statistical analyses described in

chapter 3. It reveals the demographic profile of survey results, test results of
the scale and provides aggregate information about the survey responses.

4.2. Sample size and response rate

A total of 120 questionnaires were prepared and circulated. Out of those 97

responses were received. Of these, seven (7) responses had to be discarded due
to invalid or incomplete data entries. Thus the sample comprising of a total of
90 respondents was used for analysis. From the received questionnaire
feedback, some meaningful results were found and documented.

4.3. Data presentation

Table 4.1: Number of respondents per age

Age of respondents
26-35
36-55
18-25
Above 55 years

Number of respondents
42
26
18
4

Percentage
46.67%
28.89%
20.00%
4.44%

Table 4.2. Representation by gender

Gender
Males
Females
Total

Number of respondents
49
41
90

Percentage
54%
46%
100%

From the table above we see that the proportion of our respondents by gender
doesnt differ much with 54% males and 46% females.

32

Table 4.3. Representation by education levels

Education level
No formal education or some primary school

Number

Percentage
3

3.3%

Primary School

8.9%

Some high school

10.0%

High School completed

22

24.4%

University

37

41.1%

Post graduate
Total

11

12.2%

90

100.0%

Table 4.4. Representation by monthly salary

Description

Number

Percentage

Below 15,000

29

32.22%

Between 15,000 and 35,000

38

42.22%

Between 35,001 and 70,000

16

17.78%

Between 70,001 and 100,000

4.44%

Between 100,001 and 120,000

2.22%

Above 120,000

1.11%

Total

90

100.00%

Table 4.5. Classification of respondents by mode of salary payment

Mode of salary payment

Number

By cheque

Percentage
0

0.00%

56

62.22%

0.00%

34

37.78%

Other

0.00%

Total

90

100.00%

By bank account transfer

By cash in hand
By M-pesa

Table 4.6. Classification by M-pesa usage

M-pesa use
Yes
No
Total

Number of respondents
68
22
90

Percentage
75.56%
24.44%
100.00%

33

Table 4.7. Classification by alternative to M-pesa

Alternative to M-pesa
Airtel money

Number

Percentage
16

72.73%

Orange money

18.18%

No one

9.09%

22

100.00%

Total
Table 4.8. Classification by usage time
Time using M-pesa
Less than 1 year

Number

Percentage
13

19.12%

Between 1 and 2 years

21

30.88%

Between 2 and 5 years

Total

34
68

50.00%
100.00%

Table 4.9. Classification by reason for use

Reason for M-pesa use

Number

Percentage

Sending of money to other parties

68

100.00%

Purchases using M-Pesa Payment of bills

68

100.00%

Deposits and withdrawals of cash

68
68

100.00%
100.00%

68

100.00%

68

100.00%

Loading of airtime through M-Pesa

Confirmation of account balances
All the above

Table 4.10. Rating of M-pesa salary transfer service

Rating of M-pesa salary transfer service
Excellent

Number

Percentage

29

85.29%

Good

11.76%

Fair

2.94%

Poor

0.00%

Total

34

100.00%

Table 4.11. Classification by period of use

Time since receiving salary through M-pesa
Less than 3 months

Number

Percentage

14.71%

Between 4 and 8 months

17

50.00%

Between 8 months and 12 months

12

35.29%

Between 1 and 2 years

0.00%

More than 2 years

0.00%

34

100.00%

Total

34

Table 4.12. Classification per the advantages of M-pesa salary transfer service
Reason to prefer M-pesa
salary transfers

Number

Percentage

Its easily accessible

13

38.24%

Its quick

10

29.41%

It involves low cost

8.82%

Its secure

14.71%

Convenient support

8.82%

34

100.00%

Total

Table 4.13. Classification per gained satisfaction

Satisfaction from
salary service

M-pesa
Number

Percentage

Very satisfied

23

67.65%

Satisfied

23.53%

Not satisfied

8.82%

Other

0.00%

34

100.00%

Total

Table 4.14. Disadvantages of using mobile banking services

Disadvantages of Mobile banking services

Number

Security concerns / risks

Percentage

34

37.78%

Complicated / uncomfortable mobile devices

4.44%

Too expensive

0.00%

52

57.78%

Other

0.00%

Total

90

100.00%

Nothing

Table 4.15. Suggested improvement in mobile money services

Needed improvement in mobile money

Number

Percentage

Mobile devices with bigger display

6.67%

Better input devices

11

12.22%

Higher speed of data transmission

37

41.11%

Cheaper costs of utilization

36

40.00%

Other

0.00%

Total

90

100.00%

35

CHAPTER 5. Analysis of Data

The data collected from the returned questionnaires were captured onto an
Excel spreadsheet for analysis. The data was sorted to group questions
according to applicable constructs under test. Statistical analysis was conducted
on the data as in the following lines:
1. What is your gender?

Males
Females

Figure 5.1. Gender analysis

The above gender analysis indicates that males represent a bigger part of
respondents with 54% while women make only 46% out of the total number of
respondents. This makes sense since in Kenya men are the ones many in technical
jobs such as construction and transport which constituted an important part in
our research.
2. What is your age?

Age of respondents
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
26-35

36-55

18-25

Above 55 years

Figure 5.2: Age analysis

The highest percentage of respondents were between the ages of 26 and 35
years (47%), the second largest age group was between 36 and 55 years (29%),
the third largest group was between 18 and 25 years (20%), and the last group
was over 55 years (4%). When combining two age groups, the group between 26
and 55 years contributed 76% of the respondents, which represents the

36

majority portion of the working population in Kenya.

3. What is your level of education?
100%
80%
60%
40%
20%
0%

3.3%

8.9%

10.0%

No formal
education or
some primary
school

Primary
School

Some high
school

41.1%

24.4%

12.2%

High School University Post graduate

completed

Figure 5.3: Education level analysis

While analyzing the education level of the respondents, we realized that many
of them (41%) had completed high school while another big portion of them
(24%) had done university and other 12% were under postgraduate. The results
here reflect very well the literacy level in Kenya because generally the illiterate
people are few (3%) of our respondents and literacy increases gradually from
primary level (9%) and beyond.
4. What is your monthly salary (in KES: Kenya Shillings)?
4.44%

2.22%

17.78%

1.11%

32.22%

Below 15,000
Between 15,000 and
35,000
Between 35,001 and
70,000

42.22%

Between 70,001 and

100,000
Between 100,001 and
120,000

Figure 5.4: Monthly salary analysis

Results from income analysis of the respondents show that many (42%) get a
monthly salary between 15,000 and 35,000 Kenya Shillings, followed by those
who gain below 15,000 KES (32%). The number reduces as we move from KES
35,000 towards 100,000 and more. Therefore, a big number of the workers get
a monthly salary below 35,000 KES (74%). The number of people who gain a
salary between 35k and 70k is also significant (18%) while only a total of 7% get
a salary beyond 70,000 KES.

37

5. How do you receive your monthly salary?

80.00%
60.00%
40.00%
20.00%
0.00%

62.22%
37.78%
0.00%

0.00%

0.00%

By cheque By bank By cash in By M-pesa Other

account
hand
transfer

Figure 5.5: Salary payment method analysis

While analyzing via which channel the people receive their monthly salaries, we
found that a big number of them (62%) got paid by bank account transfers but
this portion is quickly followed by those who gait paid through M-pesa (with
38%) and these two were the only methods available to pay the workers
interviewed. The results are really understandable because an M-pesa salary
payment service is new and still being sensitized but its growing rapidly in size
and importance.
6. Do you use M-pesa (Mobile Banking) services?

24.44%
Yes
75.56%

No

Figure 5.6: M-pesa usage analysis

Asked whether they use M-pesa mobile banking services, 76% of the
respondents said YES (including the ones who do not receive salaries by M-pesa)
and only 24% said NO. This means that even if some people may not choose to
use M-pesa in one way (to receive salaries in this case), theres always a need to
use it for other needs (which will be discovered a bit latter in this study).

38

7. If you dont use M-pesa, what other Mobile Banking services do you use?

No one
9%
Orange money
18%

Airtel money
Orange money

Airtel money
73%

No one

Figure 5.7. Alternative banking service analysis

Out of the 90 people who were answering questions for this study, 22 had said
they dont use M-pesa and out of them 73% said they use Airtel money, followed
by 18% who use Orange money and then by 9% of them said they use no mobile
money services. This proves that Airtel is a competitor of Safaricom M-pesa in
this field and Orange is a follower; but M-pesa is still a leader in the market.
8. How long have you been using M-pesa?
19.12%
50.00%

Less than 1 year

30.88%

Between 1 and 2 years

Between 2 and 5 years

Figure 5.8. Usage period analysis

Again the researcher wanted to know the time since the people who use M-pesa
(68) started using it. 50% said theyve been using it between 2 and 5 years
which means from 2007 when M-pesa was introduced till today, and these were
followed by 31% who said theyve been using M-pesa since between one and two
years ago while only 19% have used M-pesa for less than a year. This shows how
M-pesa is consistent in customer base since the beginning and the new (this
years) subscribers prove how important the market penetration is.

39

9. What else do you use M-pesa for?

120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
Sending of money Purchases using Deposits and Loading of airtime Confirmation of
to other parties M-Pesa Payment of withdrawals of through M-Pesa account balances
bills
cash

Figure 5.9. Other uses analysis

The results above show that apart from using M-pesa to receive salaries, all the
68 respondents who use it have other combined reasons with the same degree
of importance. Those are the use of M-pesa to send money to other people, pay
for things purchased, deposit and withdraw cash, load airtime and confirm
account balances. These services are all equally important or no one of them is
to be neglected by the users.
10. If you already receive your salary by M-pesa how would you rate the
service?
12%

3%
Excellent
Good
85%

Fair

Figure 5.10. M-pesa salary transfer service rating analysis

Out of the 34 people who receive salaries by M-pesa, 85% rated the service to
be excellent, 12% said its good while 3% said its fair. No one of the
respondents rated it to be poor. This basically means they are happy about the
service being offered.

40

11. How long have you been receiving your pay through M-pesa?
50.00%
50.00%

35.29%

40.00%
30.00%
20.00%

14.71%
0.00%

10.00%
0.00%

Less than 3 Between 4 Between 8 Between 1

months and 8 months months and and 2 years
12 months

Figure 5.11. Analysis of periods of use for M-pesa salary service

The same respondents from above were also asked the time theyve been
receiving salaries through M-pesa. 50% of them said its between 4 and 8
months, 35% said its between 8 and 12 months while only 15% have used it in
the past three months. This trend shows how M-pesa salary transfer service
was made much popular this year since thats where all our respondents joined
the service even though they were using it for other services as seen in pages
above.
12. If you like this mode of salary payment why would you prefer it instead
of other options?
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

38.24%
29.41%
8.82%
Its easily
accessible

Its quick

It involves low
cost

14.71%

Its secure

8.82%
Convenient
support

Figure 5.12. Analysis of preference for M-pesa salary service

While analyzing the reasons as to why the people who receive salaries by M-pesa
have chosen it instead of other methods, 38% said its easily accessible, 29%
said its quick, 9% said it involves low cost, 15% said its secure and 9% said they
get convenient support when needed. All this data show that the service is well
perceived by different individuals; hence preferred over other options.

41

13. Are you satisfied with M-pesa mode of salary payment?

8.82%
Very satis[ied

23.53%

Satis[ied
Not satis[ied

67.65%

Figure 5.13. Analysis of satisfaction from M-pesa salary service

Asked about their satisfaction from M-pesa mode of salary payment, 68% of
the 34 respondents said they are very satisfied, 24% said are satisfied and only
9% said they are not satisfied. This shows there is still need to improve the
service even though the overall total of satisfaction is rated at 91%.
14. What are, in your opinion, are the disadvantages of Mobile Banking?
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

57.78%
37.78%

4.44%

0.00%

Security
Complicated / Too expensive
concerns / risks uncomfortable
usage of mobile
devices

Nothing

Figure 5.14. Analysis of the disadvantages of mobile banking

The 90 respondents also talked about the disadvantages of mobile banking. 58%
said there is none, 38% said theres a security concern and 4% said mobile
phones used are complicated or uncomfortable to use. This shows that even
though the bigger portion of the people said there is no problem, the ones who
highlighted security concerns are also significant and this gives room for
Safaricom to tighten security and avoid risks for the service.

42

15. What could, in your opinion, make Mobile Banking more attractive?
50.00%

41.11%

40.00%

40.00%

30.00%
20.00%
10.00%

6.67%

12.22%

0.00%
Mobile devices
with bigger
display

Better input
devices

Higher speed of Cheaper costs of

data
utilization
transmission

Figure 5.15. Analysis of suggested improvements

The same people were again asked about what could be done to improve mobile
banking services to make them more attractive and 41% said the speed of data
transmission should be increased, 40% said the costs of utilization should be
minimized, 12% said better input devices should be made widely available and 7%
said mobile phones with bigger screens should be increased on the market.
From this analysis we see that the costs of utilization and data transmission
speed are the major concerns of the people and should be addressed by the
service providers to make mobile banking more attractive in the future.

43

CHAPTER 6. Discussion and Interpretation of Findings

6.1. Introduction
In the introduction of the report, the objectives of the study were highlighted.
The objectives were to give reasons as to why people start using the mobile
money transfer services, identify the trends in usage of mobile banking by the
employees while focusing on their expectations, get and analyze the views of
workers who receive wages and salaries through mobile money, investigate
mobile money as a method of employee salary payment while showing its
advantages and disadvantages and to point in the directions where mobile
banking may evolve in the future.
In chapter two, the literature provided detailed information about mobile money
(M-pesa) and its use in paying workers salaries and wages. The reasons why
people use mobile money were very well discussed especially under households
benefits of M-pesa and the way M-pesa is used in paying salaries was discussed
extensively up to the previous chapter where we analyzed field questions one by
one in order to justify the objectives of this research study.

6.2. How people start using mobile money

An analysis of why people start using mobile money (M-pesa in this case)
revealed that people followed the convenience of mobile payment M-Pesa
(convenient for social transactions, widespread use of mobile payment M-Pesa),
its speedy business transactions, its ease of use, its higher convenience than
bank account, its security and time saving abilities.
People use mobile payment services to frequently send money to other parties,
frequently purchase using M-Pesa Payment of bills using, frequently deposit and
withdraw cash for business and personal use, load airtime through M-Pesa and
frequent confirmation of account balances.
6.3. The trends under which employees use mobile money, their expectations and
perceptions about the service

The research findings revealed that 76% of the total respondents use M-pesa
to send money to other people, pay for things purchased, deposit and withdraw
cash, load airtime and confirm account balances.
Their expectations were found to be the support from the mobile service
provider (Safaricom), adequate quality of services, propensity for using the

44

mobile payment (M-Pesa registration is free with easy registration

requirements), satisfaction with customer services and enhanced easy
communication. They also expect lower costs of mobile payments, affordable
cost of replacement of sim card, easy replacement of lost sim card, affordable
cost of sending or receiving money.
6.4. The views about M-pesa salary transfers
The respondents who use M-pesa to receive salaries rated it very well with a
total of 85% rated the service to be excellent and the remaining 15% said its
good and fair. These people were happy about the service because its easily
accessible, quick, low costly, secure and supportive. Apart from this, 91% of
them said they are satisfied with the service. This gives M-pesa a good reason
to be chosen over other options of mobile money services available on the
market.
6.5. The advantages and disadvantages of mobile money
Apart from the above points that provide satisfaction to the people, hence
called advantages of mobile money, 58% of the respondents said there is no
problem/disadvantage with mobile money services but 38% said theres a
security problem and 4% said there are complications with mobile phones used.
Therefore, however small may the problems appear to be, they are there and
should be addressed in order to ensure better services.
6.6. The future of mobile money services
This is a predetermination of how the services will be in the future and what
needs to be done now. The respondents said the speed of data transmission
should be increased in order to make the services more attractive, others said
the costs of utilization should be minimized, others said better input devices
should be made widely available and the rest said mobile phones with bigger
screens should be made widely available on the market.

45

CHAPTER 7. Conclusions, Implications and Recommendations

7.1. Introduction

This chapter synthesizes the findings of the research. It reviews the research
background and objectives, and summarizes the research findings. The chapter
concludes with recommendations for future research.

7.2. Review of research objectives

The research focused on the following objectives: to give reasons as to why

people start using the mobile money transfer services, to identify the trends in
usage of mobile banking by the employees while focusing on their expectations,
to get and analyze the views of workers who receive wages and salaries through
mobile money, to investigate mobile money as a method of employee salary
payment while showing its advantages and disadvantages and to point in the
directions where mobile banking may evolve in the future.
To comprehensively respond to the questions raised and for understanding on
the dynamics at play, it is essential to share the implications of the research
findings.
7.3. Practical implications for business
The results showed that only 38% of the total respondents use M-pesa to
receive their salaries; 62% said they dont use it for that purpose but a bigger
part of them use it for other benefits such as mobile purchases, sending and
receiving money frequently, checking balances, topping up airtime, etc. This is a
great marketing opportunity for mobile money service operators (especially
Safaricom M-pesa) to focus on demonstrating the simplicity, time saving,
usefulness and cost benefit of using mobile money for wages and salary payment.
The results of findings also showed that 73% of the respondents who do not use
M-pesa use Airtel money, which shows that Airtel is the biggest competitor with
Safaricom. Users say M-pesa salary transfer service is faster, cheaper, more
reliable and safer; which was mainly proved by those (85%) who rated the
service to be excellent and the implication is a bigger necessity for Safaricom
to invest hugely in it so that many companies (including big ones) to use it in
paying wages and salaries for their workers.
However, the findings showed that there is need for the mobile money service
providers in general to deal with the risk concerns of the subscribers and try all

46

the best to minimize costs and increase the speed of transactions while at the
same time introducing or increasing the number of input devices.
Furthermore, mobile banking service providers need to make an effort to build
trust with customers. Service providers need to continuously demonstrate their
ability to provide secure value-adding services, their intention to be fair and
honest with regard to customers requirements, and demonstrate good intent in
terms of empowering customers.
Finally the increased use of mobile banking services will be beneficial to both
the mobile banking service provider and the users.

7.4. Recommendations for future research

The results of this study showed that there is a negative relationship between
customers trust and the degree of use. Few people are using the mobile money
to receive their wages and salaries; and that is a problem to be addressed
quickly by the service providers. Hence, future researches should help to
diagnose where the problem really is, be it in the individual workers themselves
or the subscriber companies that employ them and need to collaborate with the
mobile money service providers.
Future researches should also possibly give a better understanding of the
reasons why the respondents who placed so much trust in their mobile money
service provider (such as M-pesa) did not use it for wages and salary payment.
Therefore, further research is recommended on the effect of trust to
perceived risk and finally general use of mobile banking for all the workers
without exception.

47

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22. http://www.safaricom.co.ke/index.php?id=270
23. Business Daily frica, April 1st, 2011

48

24. http://www.textually.org/textually/archives/2011/10/029654.htm
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http://www.moneyweb.co.za/mw/view/mw/en/page292671?oid=550792&s
n=2009+Detail
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Africa%20Investor%E2%80%99s%20Conference%20New%20York%202
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46. http://www.safaricom.co.ke/index.php?id=270
47.

http://www.mwalimusacco.coop/index.php?option=com_content&vie
w=article&id=60&Itemid=73

49

Appendices

1. M-pesa Outlet in Nairobi

2. You can now pay salaries with M-pesa ad

50

3. M-pesa launch ad

4. M-pesa customer education ad

51

5. M-pesa customers and agents in 2011

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52

6. Pesa point advert (ad for using mobile phone and ATM machines for M-pesa)

53

7. M-pesa declaration of trust

54

 55

 56

 57

 58

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8. Research questionnaire

Mobile Banking as a way of conducting business and utilization of financial

services via mobile devices such as mobile phones is becoming very popular in
these days and its acceptance is obvious in todays world, particularly as a means
to strengthen customer relations and financial services such as bills (as well as
wages and salaries) payments and transfers.
This questionnaire is prepared by Jean Claude Rwubahuka, an MBA student at
Amity University, Center of e-Learning, India. The research seeks to investigate
workers perception towards mobile phone banking, assess its application in
salary payment/transfers and the extent to which employers are willing to use it
and how employees perceive the service in Nairobi.
Therefore, the researcher needs your kind cooperation in answering the
following questions by ticking the appropriate alternative and/or fill in the
spaces provided. Your responses will be treated with confidence and at all times
data will be presented in such a way that your identity cannot be connected with
specific published data. The results of the study will be used for academic
purposes only and they will not be disclosed to anyone.
Thank you for your kind cooperation.

1. Your gender
Male
Female
2. Your age
Between 18 and 25 years
Between 26 and 35 years
Between 36 and 55years
Over 55 years
3. Your level of education
No formal education or some primary school
Primary School
Some high school
High School completed
University
Post graduate
4. Your monthly salary (in KES: Kenya Shillings)
Below 15,000
Between 15,000 and 35,000

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Between 35,001 and 70,000

Between 70,001 and 100,000
Between 100,001 and 120,000
Above 120,000

5. How do you receive your monthly salary?

By cheque
By bank account transfer
By cash in hand
By M-pesa
Other (specify) .
6. Do you use M-pesa (Mobile Banking) services?
Yes
No
7. If you dont use M-pesa, what other Mobile Banking services do you use?
Airtel money
Orange money
No one
8. How long have you been using M-pesa?
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
9. What else do you use M-pesa for?
Sending of money to other parties
Purchases using M-Pesa Payment of bills
Deposits and withdrawals of cash for business and personal use
Loading of airtime through M-Pesa
Confirmation of account balances
Other (Specify) .
10. If you already receive your salary by M-pesa how would you rate the service?
Excellent
Good
Fair
Poor
11. How long have you been receiving your pay through M-pesa?
Less than 3 months
Between 4 and 8 months
Between 8 months and 12 months

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Between 1 and 2 years

More than 2 years
12. If you like this mode of salary payment why would you prefer it instead of
other options?
Its easily accessible
Its quick
It involves low cost
Its secure
Convenient support
13. Are you satisfied with M-pesa mode of salary payment?
Very satisfied
Satisfied
Not satisfied
Other Specify
14. What are, in your opinion, are the disadvantages of Mobile Banking? (Multiple
choices possible)
Security concerns / risks
Complicated / uncomfortable usage of mobile devices
Too expensive
Nothing
Other (specify) .
15. What could, in your opinion, make Mobile Banking more attractive? (Multiple
choices possible)
Mobile devices with bigger display
Better input devices (e.g. an external keyboard for mobile phones)
Higher speed of data transmission
Cheaper costs of utilization
Other (specify).

THANK YOU!
If you have any queries or additional comments kindly email to
aliasdouglas@yahoo.fr

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