The Technical University of Kenya

Department of Mathematics and Statistics

School of Mathematics and Actuarial Science

A report on Acceptance of M-Pesa by all to minimize poverty

By: Carlos Mbingo Maundu

REG NO. 111/04937

Date:14-10-2014

1. Problem Statement

The purpose of this report is to identify the effect that M-Pesa has on the living standards of the people living in Kenya

2. Justification of the study

One may expect alternative money transfer methods of different money channeling systems to differ in their efficacy in achieving different goals. Several reports have suggested that since the inception of mobile money transfer, poverty has significantly dropped in Kenya. This findings needed to be carefully interpreted and the accompanying prove of the statement justified.

The establishment of M-Pesa in Kenya has usually been regarded as the best means of ensuring that the of Safaricom subscribers can easily transfer money safely from their mobile gadget to another and also carry out transactions like payment of bills electronically.

The review of available literature also does not give a precise arid uniform picture about the performance of M-Pesa system in minimizing poverty relative to other money channeling systems. The current state of knowledge about the structure and performance of alternative forms money channeling systems in Kenya thus clearly warrants further investigations, and it was against this background that the present study was undertaken.

3. Hypothesis

The basic hypothesis is that poverty can be significantly lowered by increasing the use of M-Pesa services within Kenya.

4. Objectives

4.1 General

• to evaluate and critique previous literature about the effectiveness of M-Pesa services to consumers.

• to provide information to support or test models about the problem statement.

4.2 Specific

• to make some suggestions to improve the relevance and effectiveness of M-Pesa activities in reaching lower class level earners.

• to make an analysis of the M-Pesa services and the extent of customer’s participation.

• to determine the constraints of the M-Pesa services in reaching the lower class level earners.

5. Methodology

5.1. Population of the study

The present study was carried out in four selected counties namely KITUI, MANDERA, NAKURU and MURANG’A. Selection of these counties was based on the assumption that their M-Pesa systems provided more relatively satisfactory money transfer services to customers than those provided to by other channels.

5.2. Sampling procedure of the study

A multi-stage purposive-cum-stratified random sampling design was followed for selection of the study areas.

5.2.1. Selection of study areas

The study was confined to representative counties. A separate list of number of zones and number of villages from each selected extension area was collected from the study counties for the selection of study areas for the study. Thus, two zones which were sufficiently close to the study counties to enable a series of visits to selected villages by the researcher over a limited period of time were chosen. From each zone, four extension areas and from each extension area eight villages were selected by using simple a random sampling technique.

5.2.2. Selection of respondents

From each village, 15% of Safaricom subscribers were selected randomly from the lists provided.

5.3 Dependent variables

5.3.1. Effectiveness of M-Pesa services

Mott (1972) defined 'effectiveness' as the ability of the organization to be mobilized to meet the demands in the areas of production, adaptability and flexibility.

According to Etzioni (1976), the actual effectiveness of a specific organization is determined by the degree to which it realises its goals.

In the light of the above definitions, in this study I conceptualized the meaning of effectiveness as the ability of M-Pesa services to mobilize its capacity to meet the demands of the Safaricom subscribers in the area of improving their livelihoods.

5.4. Independent variables

The major criterion for the selection of independent variables was from published literature related to the study.

5.4.1 Age of Subscribers

Age of subscribers was operationally defined as the chronological age of the Safaricom Subscribers’ respondents.

5.4.2 Education

Education referred to the level of formal education the Safaricom Subscribers of the study had reached. These were categorized into four groups: illiterate, informal education, primary level (primary completed/not completed) and secondary level (secondary completed/not completed).

5.4.3. Socio-economic status

This referred to the position of the Safaricom Subscribers in society and was determined by various social and economic variables such as education, type of housing, occupation, material possession, type and size of the family.

5.5. Instruments for data collection

Interview-cum-structured questionnaires were designed and used to collect information and data for this study. The instrument was designed for Safaricom Subscribers as users of the M-Pesa services to identify the ways they perceived this service had helped them reduce poverty.