Beyond M-Pesa, Kenya's market slow to scale mobile solutions

By Christopher Burns and Jonathan Dolan

Kenya has emerged as the tech superstar of Africa, spurred by its mobile adoption, entrepreneurial spirit and forward-thinking regulations.

Mobile market penetration, for instance, stands at 71 percent, significantly higher than the 48 percent average in eastern Africa. M-Pesa provides financial services to 17 million Kenyans and innovators at m:Lab East Africa incubate new concepts such as M-Farm, the SMS-based information service and sales facilitator, which promises to revolutionize the way farmers engage with markets — critical for a country that relies on agriculture for 25 percent of its gross domestic product.

The Mobile Solutions team at the U.S. Agency for International Development is accelerating the adoption of market-based M4D solutions within USAID programs and across the broader international development community. We visited Kenya to discover firsthand what sets it apart. We asked ourselves, is Kenya as successful as we have heard? And is the tech revolution truly reaching Kenya’s base-of-the-pyramid consumers — those living under $2.50 per day?

We found that the answers are mixed. In fact, very few of Kenya’s 44 million people are using M4D “value-added” services at scale beyond M-Pesa. While M-Farm is often touted as an example of a successful service — and let’s be clear, it is potentially an important component to profitable Kenyan agriculture — it reaches fewer than 20,000 users.

When we visited Kibera and Mukuru, urban “slums” home to more than 1 million people just a few kilometers from Nairobi’s city center, most inhabitants owned or had access to a basic mobile phone. A good number of people used M-Pesa, and several residents even asked us to be their Facebook friends, but none of the people we met used mobile applications to access health, education or employment services. Similar trends cropped up in other parts of Kenya.

Why are M4D services not scaling to reach Kenya’s poor?

Put simply, the mobile services ecosystem has three primary phases: (1) user research and design, (2) development and incubation, and (3) distribution and marketing. Each phase is essential to the effective functioning of the system as a whole.

Our trip revealed that these stages have developed at different rates. Throughout our conversations in Kenya, we found consensus that the development and incubation stage — which includes, among other things, app competitions, prizes and hackathons — is already dynamic and well-funded.

What we observed, however, is a need for greater coordination across all three phases as well as greater investment in the first and third phases.

Also, we were particularly struck by the challenges with distribution channels. This is, in part, due to lack of customer awareness and to the technical limitations and costs of disseminating information.

Lack of customer awareness

In rural areas, despite the availability of mobile-powered agricultural pricing and market information (and the excitement in the development community about these solutions), none of the farmers we met were aware of these services.

One Acre Fund’s agricultural extension workers regularly use basic mobile voice services to communicate with farmers in Bungoma, a rural community near the shores of Lake Victoria. The introduction of phone service (and cheap voice rates) has greatly improved productivity and efficiency in their farming methods, but more advanced solutions have not taken hold. For example, when we showed a farmer the M-Farm app, he was intrigued and commented on how the app could help his work, but admitted that he had never seen anything like it. We received similar reactions to the iCow app from cattle farmers linked to the Nyala Dairy cooperative in Ndaragwa, four hours north of Nairobi. This experience reinforced the need for better marketing and outreach to the farmers.

A recent iHub report further explains that a lack of effective, large-scale marketing campaigns has led to low consumer awareness and poor understanding of applications and how to use them throughout the country.

Technical limitations and costs

The fragmented nature of the mobile industry, with its incompatible phones and networks and limited interoperability, presents a significant barrier to scale in many markets. In Kenya, distribution channels for mobile apps are currently limited to three outlets: basic phone handset partnerships, mobile operator partnerships, and delivery via SMS or USSD. All present challenges to scale in terms of cost and interoperability.

In this context, launching a mobile solutions venture can be expensive and risky for developers.

For example, operating a USSD service, a common method to distribute mobile services because the platform can reach basic phone users without data access, can cost $1,000 per month or more. Mobile operators who operate such delivery platforms often find it hard to choose among the many different developers who hope to get an unproven app embedded in their systems.

Making these choices even more difficult is the fact that operators can, in some instances, be held liable for the content transmitted through an app that they support.

Implications for our work

These distribution challenges raise several new questions as we expand our M4D efforts.

Could we (the larger M4D community) rally around one or two “one size fits many” solutions that aggregate information and services into customizable platforms whose value propositions are so great that they can be loaded onto all phones?

Is there a technical solution for creating something akin to an “app store” on simple-feature phones so users can find available M4D apps and more readily understand their utility and effectiveness?

Finally, in the absence of solutions that address user needs directly, should we invest more heavily in solutions that leverage intermediaries (people on the ground) for information sharing and data collection?

As we seek to answer these and other questions within our work at USAID, we welcome any and all comments and questions to continue this dialogue.

Christopher Burns is head of Mobile Access for USAID’s Mobile Solutions team. In his more than four years with the agency, he has spearheaded several public-private partnerships aimed at increasing mobile technology ownership and access to underserved women, including the GSMA mWomen Program that is helping to reduce the mobile phone gender gap in the developing world.

Jonathan Dolan is Mobile Access and Mobile Money Senior Advisor for USAID’s Mobile Solutions team, where he applies his background in inclusive business to the intersection of commercial and development interests in mobile technology.

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