Thursday, May 28, 2020

Part 2: The war on COVID in Kenya: Will the social networks of mobile money survive?

by Sibel Kusimba, University of South Florida, Chap Kusimba, University of South Florida, and Gabriel Kunyu, Independent Researcher

Meme circulating on Kenyan WhatsApp. Bora Uhai is a phrase
meaning that nothing matters more than life. It is commonly
used when things don't work out as planned or expected.

“I saw people rejoice when it was announced that there would be no transaction fees for any amount sent below 1000 Kenya Shillings (US $10). But since there is no money, people are not sending.” Millicent has had an M-Pesa shop in the Sweet Water estate of Machakos, Kenya, for several years. This town about 60 km southeast of Nairobi has been a hub of trade in and out of Kenya’s capital since colonial times and before1. The area is still known as a commercial hub. But on April 7, 2020, all transport and travel in and out of Nairobi to the rest of the country was cut off for 21 days as part of the authorities’ response to the COVID-19 pandemic. On that day chaos ensued when travelers and drivers were cut off en route; some went off road and on foot to reach their destinations. Now the Athi River just two miles north of Machakos has been completely cut off, as has the port town of Mombasa - and with it the many goods, such as foodstuffs, household goods, and second hand goods that so many make a living trading in this area.

Millicent reflected that initially there were a lot of people sending money, especially in the week before the roads were closed, when restrictions on gatherings and restaurants were imposed. There were fewer withdrawals, and the country’s many itinerant urban workers were sending money to their rural families. But now at the end of April, M-Pesa agents like Millicent are finding they have fewer customers. People used to wait in the queue at Millicent’s shop before COVID, but these days she will see only 2-3 people in a whole day. She says they are well off people such as teachers, and that they are loading money on to their phones, not cashing out. She is not sure where this money is going, but she reasons they are either sending money to relatives in the rural areas or using the digital balance on their phones to shop at the grocery store and use digital retail payment- Lipa na M-Pesa (a Safaricom merchant pay service based on sending money to a till number associated with a shop or seller). Millicent says most people are not coming to use her money transfer services. She understands why because she is having the same problem: no money. Although she used to send money to friends and family before COVID, she cannot anymore. She is instead relying on Fuliza loans for airtime (a Safaricom loan service) and on digital M-Shwari loans (offered by the Commercial Bank of Africa, through Safaricom) to feed her family. “Any money I get goes to paying these loans and for food. I cannot send any more.”

The Western Kenyan town of Kimilili about 50 km from the Western national border with Uganda is surrounded by farmland. Most of the families here combine income from several sources, such as farming, selling, trading, and labor of many kinds, and occupations such as teaching or the civil service. Mobile money agents here are also seeing drops in customers since the lockdown. Kimilili mobile money agent Annette is a student at Mount Kenya University studying economics and finance. When the university closed due to COVID she came to stay at the home of her brother, a local teacher. Her family had moved around due to “family problems” and her brother’s place was the best option for her when universities closed. We learned in speaking with her that her brother is the registered M-Pesa agent, but she is “helping him out” by handling transactions. Annette expressed a lot of anxiety about her planned graduation in December and hoped it would not be delayed because of the virus. Her brother said that transactions have plummeted since the COVID response was instituted. He explained that people are following the government’s directive to avoid cash: people with money are using Lipa na M-pesa digital retail much more than before. Annette still gets some business from people cashing in and out in relatively small amounts. Profits are way down because amounts of cash in/out is how agents earn commissions. Annette appreciates the government directives about handwashing and social distancing but says few people are taking it as seriously as they should. "You cannot stop Kenyans from shaking hands," she says. Annette herself does not wear a mask, as she says it aggravates her asthma.

Under Kenya’s curfew, informal workers – barbers, hairdressers, shopkeepers, repair shops, bicycle, and car maintenance, along with M-Pesa agents – are using masks and gloves and sanitizing their workplaces. In Sweet Water in Machakos, the county government fumigates shops regularly, but businesses must still pay for water and sanitizer. Workers here must make money outside of a strict curfew which shortens their working days. But the commercial activity they depend on has plummeted. With Nairobi closing off informal workers have left for their rural homes; shops have less business as people fear the virus; gatherings and celebrations are forbidden, cutting off the personal care industry and the celebration economy of tent rental and hiring of musicians and DJs. With the roads cut off, the cost of goods has doubled or tripled.

An M-Pesa agent shop, Kimilili, Kenya. May 9 2020.
Note soap solution and water on the left. Photo Chap Kusimba. 

Money-Transfer Networks
Kenyans use money transfer to send and receive money with friends and relatives in dense social networks. Participating in these networks is necessary for economic life and social belonging2.  The effect of the COVID restrictions and their impact on informal workers, who earn their money every day, has been stark in the Sweet Water area. Not only have livelihoods been cut off; but informal workers have been left without money, and with it the ability to participate in reciprocal money-transfer networks that support friends and family. In the Sweet Water area we met and spoke with several informal workers who are all experiencing the same hardships, whose stories we sketch out below. Customers have left for upcountry, and wholesale goods have shot up in price. With a loss of the daily income these informal workers have turned to M-Shwari digital credit loans. They have been unable to send and receive e-money in their networks.

John is a young man who sells sausages in the marketplace at Sweet Water. Most of his customers left for their family homes in the rural areas as soon as the government announced that roads would be closed. His stock costs more now, and with the curfew his business hours are shortened. “I no longer send money as I used to because what I get is less than before. Even relatives and friends don’t send money anymore.”

Maryanne is a waitress in Sweet Water who was fired when the business closed. Her sister has sent her money to care for her four-year-old. She is trying to take in washing for money but is finding few customers. Another lady, Mary, is a tailor, who mostly repairs peoples’ clothes. She is usually paid in cash because these small repairs are paid for in coins. She is often supported by friends and relatives, but she has wondering what she will do now that even these small coins are not coming. Down the street, Risper owns a salon and has seen a big reduction in business. Her customers have reduced greatly. Furthermore women are no longer going to church, celebrations, and gatherings. Those who do come use cash exclusively. “There is no sending and receiving like before” in her social network, Risper said. Her children are home from school, and she must cook much more often for them.

Alex is another informal worker in Sweet Water. He butchers and sells fresh chicken, but his business is near collapse. He has no customers, cannot any longer buy chicken in bulk so he must pay more for his stock. His children are home as well and he has been feeding them chicken, further threatening his business. Normally he reaches out to friends and siblings when life is hard. But these days “My friends are not on jobs, so they don’t send me.” There has been more conflict in his home because of money problems. Taxi driver Gerald said that most savings club members have not met their obligations for March or April – again, people have no money. Taxi driving gave him a lot of money at night, but in the day people will take the bus. Disagreements at home have ensued.

Timothy is 25 and in sales for off-grid solar lighting (pay as you go).  He also makes money ride hailing on a rented motorcycle (boda boda). His wife runs a retail shop near their home. In the past month he has had fewer customers for solar lighting, and many of his clients are having trouble paying. He used to give several customers motorcycle rides at a time, but these days he is checked by the police constantly for overloading (which is against social distancing rules) and he is afraid of being arrested. As a worker in the transportation field the police would often hassle him before as well, but nowadays harassment has increased. Now that police have been charged with enforcing curfews and other COVID restrictions, they will arrest you for any reason. Timothy will have trouble paying rent to the owner of his motorcycle. His mobile money social network has also been affected. He used to send money to his mother (his natal home where she still lives is about 30 km away) and his wife in equal amounts to “balance the money;” but since COVID he has only been able to send money to his wife.

Payment Channels 
Methods of payment are changing and, as in other places, are revealing the effects of social and economic class. In spite of the suspension on fees, the increasing use of digital payment is concentrated among wealthier people who shop in the supermarkets and spend more money. The poor are focusing on cash as they pay in small amounts. Cash is also, we discovered, a way to keep value safe in these uncertain times. Many people who are in debt to Safaricom’s Fuliza services keep and use cash. This is because any amount loaded onto the Safaricom wallet will automatically be deducted to pay the Fuliza balance. Consequently, many people use cash to avoid their balance garnished to pay the Fuliza digital debt.

Sweet Water shopkeeper Mamake is sending and receiving a lot less with her friends and relatives. No one has any money right now, she said. As before, most of her customers pay a few pennies cash for goods packaged in the smallest quantities. Wealthier customers go to the shops where they can follow the government directives to use digital payment. She says her customers “can’t afford to put money on their phones.” The costs of goods has increased for her, but she cannot raise her prices. Her customers will not afford the goods, so she has tightened her own margins instead. She is the breadwinner in her home and her children depend on her work. She has started feeding the family with items from her shop out of necessity – but it will also hurt her business.

A lucky few have found opportunity in these circumstances. Faith runs a movie shop where she sells DVDs for 50 shillings (US$00.50) to people who can afford this luxury. Because many people are staying home she is getting more business. Her customers come in the evening before curfew. Most are paying with M-Pesa because of the belief that cash spreads the virus. Kids are paying with cash. They are home from school, and they pool their coins together to pay. With increased business, she spends more time and money on transport, electricity, and internet for downloading and copying movies. Her children eat at home now which is costing her more money. But she carefully noted that money transfer services have dropped transaction fees. She is sending more money to her rural home and she is able to help friends who are out of work and need food with cash and money transfer. Similarly, Peter, a barber, says his business has not changed. People will always want to look good, he says. James runs a video shop and says business is normal. People are sending less; so he is trying to help his family and friends when he can. He recently sent 500 Kenyan Shillings (US$5) to a friend who was travelling.

Uncertainty was foremost in peoples’ thoughts about the virus. Used clothes seller Jacob has been destitute since market days were banned. His stock has skyrocketed in price and he has had trouble selling clothes to customers, who think his clothes might be from China and therefore be contaminated. He expressed a great deal of sadness in our interview:
"I lack happiness because I need more money for my family because their needs are not met. I do not send money to friends, because I do not have. Neither do they send me. Fewer people are sharing with friends with M-Pesa as before. Will the government lock down completely? People are sending very small amounts, but they are also keeping money. Because we do not know what will happen with this virus situation."
What will happen? Will the extreme sacrifices that Africa’s poor are making to stop the virus make a difference in the end? COVID-19 and public health efforts to contain it are causing extreme shocks to Kenyan households. Their social networks are their safety net, but they may not be strong enough to provide much resilience, beyond the day to day survival of small digital loans. Will the social networks of mobile money survive the virus?


1 Traders, including women traders, from the region around Machakos through their activity built networks connecting the colonial capital with supplies of foodstuffs and other goods. See Claire Robertson, Trouble Showed the Way, 1997, Indiana University Press.

2 Kusimba, Sibel, Gabriel Kunyu, and Elizabeth Gross. 2018. Social Networks of Mobile Money in Kenya. In Money at the Margins: Global Perspectives on Technology, Financial Inclusion & Design, edited by Bill Maurer, Ivan Small, and Smoki Musaraj, Berghahn, London, pp. 179-199

Stay tuned for Part 3: 
"South Africa in lockdown: innovation in G2P payments"

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