This archive report was first published on 20 April 2020.
As the COVID-19 pandemic continues to spread globally, its economic impact has been felt in various countries, including Kenya. In response to the crisis, the Central Bank of Kenya announced a set of directives on March 16, 2020, aimed at promoting digital transactions and reducing the spread of the virus.
One of the directives eliminated customer charges on transferring funds from a bank account to a mobile wallet, effectively encouraging customers to use digital deposits instead of physical cash. Another directive made it free to transfer funds under Sh1,000 ($10) between mobile wallets, further promoting digital transactions.
As a result of these directives, mobile money and bank agents have seen a significant decline in transactions and commissions. Many agents have reported a drop in business, with some even having to close shop due to the reduced demand for their services.
A recent research study by Caribou Digital and Microsave Consulting found that a significant number of agents indicated that the curfew imposed by the Kenyan government had negatively impacted their business. The curfew, which exempted providers of essential services, was implemented from March 26, 2020, and limited business hours.
Despite the challenges, some agents have reported an increase in the value of deposit transactions, which can be attributed to the increased limits on mobile wallet funds and per-transaction limits. However, this has also led to a shortage of float, causing agents to turn down customers who want to deposit higher amounts.
A coordinated approach is required to ensure that agents are able to realize their full potential as efficient conduits of financial support to vulnerable households. This includes providing agents with clear instructions on maintaining hygiene and their role in fighting the pandemic, as well as providing them with the necessary equipment and support.
Mobile money providers and banks, in partnership with governments and health ministries, should work together to provide agents with masks, sanitizers, and gloves to protect them as essential frontline workers. Additionally, DFS providers should review bill pay/merchant commissions to incentivize agents to accept digital payments in preference to insisting on cash payments.
Finally, governments should consider distributing cash support payments over time to reduce liquidity stress and encourage the use of digital payments. This would not only reduce the risk of further spreading the pandemic but also alleviate the financial burden on bank agents.
Edward Obiko is a senior manager at Microsave Consulting.
