NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, January 4, 2017

At the time of M-Pesa’s launch in 2007, few could have conceived the mobile money service would be as ubiquitous and deeply entrenched in the lives of millions of Kenyans as it is today. A sizable portion of Kenya’s economy is now deeply ingrained in the platform to levels that are starting to concern officials on the economic consequences in the event of system-wide collapse or compromise.

While acknowledging its important role, Treasury officials think mobile money should be regarded as a “plausible fiscal risk” to the country given the growing inter-linkages with different sectors of the economy. At least 25 million Kenyans use the Safaricom-owned service through which they transacted $28 billion in 2015. This was equivalent to about 44% of the country’s GDP of $63.4 billion at the end of the period. In the first three quarters of 2016, it transacted $25 billion. It is the leading mobile money platform globally in terms of regular users and transactions.

“The financial and other institutions linked to this system would be susceptible possibly amounting to the value transacted through the channel, were this risk to materialize,” the government noted in a recently released budget report (pdf, pg.83).

Obvious consequences like loss of deposits, loss of potential state revenue and intractable damage to market confidence would put pressure on the government to compensate for such losses.