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Mobile money transfer services emerged in Kenya sometime in the past decade but in 2007 with Safaricom’s M-pesa service and M-kesho in 2010. The usage of the service is common in the country among subscribers and also among the unbanked populations in the rural areas.

The purpose of this study was to look into mobile money transfer, its emergence, impact and delve more into the usage among ordinary users. The theoretical part of the study focuses on banking in general in the world and other related services that include mobile money trans-fers which emerged with trends in mobile telephony.

The relevance of the information presented is to pave way for further studies on topics relat-ed to mobile money transfers and its economic significance to the developing nations using the service. Additionally, to give ideas for future studies related to the topic.

The main goal was to get firsthand information from selected respondents representing sub-scribers who are using Safaricom’s mobile money transfer services and their thoughts on the pros and cons of the services.

This was done by issuing a questionnaire with 12 questions to potential respondents and ana-lyzing the data presented. Collecting information related to the topic involved reading past articles, journals and periodicals to lay a foundation for carrying out the study.

The results of the study show that 89% of the respondents prefer using the mobile money transfer service M-pesa while the other 11% prefer using formal banks to carry out their finan-cial activities. They all gave their reasons for their preferences which give insight on the posi-tive and negative sides of mobile money transfers.

In conclusion, the results of this study have potential to be generalized but would have been better if more information was collected from more respondents. The impact of mobile mon-ey transfer services has mostly been positive and the usage of the services promote financial aptitude among ordinary users.

1 Introduction
            1.1 Background of the thesis
            1.2 Thesis purpose
            1.3 Thesis questions
            1.4 Thesis objectives
2          Theoretical background
            2.1 Review on banking
                        2.1.1 Forms of payment
                        2.1.2    Internet banking
                        2.1.3    Banking in Kenya
            2.2 Mobile money
                        2.2.1    Mobile based money transfers
                        2.2.2    Features of M-pesa service
                           Activation to use the service
                           Depositing money
                           Sending money
                           Withdrawing money
                           Buying airtime
                           The M-kesho service
                        2.2.3 Use of mobile money in MFIs in Kenya
                        2.2.4    Mobile money transfers in Africa
3 Methodology
            3.1 Research design and procedure
            3.2 Data presentation
            3.3 The questionnaire
            3.4 Reliability and validity
            3.5 Analysis and findings

4 Discussion

5 Conclusion and recommendations


1       Introduction

The evolutions of mobile technology in the years that have passed have given rise to the need in individuals to own mobile phones. Unlike landlines, the popularity of mobile phones rapidly developed and promoted communication in the world. In Africa, mobile technology has been embraced in a great way. Some of its roles include communication, connecting with others and educating the different groups of people around the continent.

One of the evolutions in mobile technology is the introduction of mobile wallets. This is a vague description of mobile banking which basically involves money transfers from one person to other using mobile phone applications. This type of technology has given birth to a new revolution where banking has been simplified and is reaching a wider population of mobile phone users. The users also include the less privileged who had earlier no access to actual bank accounts in the formal banks. (Dovi 2008)

In Kenya, there was an estimate of 1,187,122 mobile phone subscriptions a decade ago which later increased yearly. As of the end of the year 2011, the number had dramatically risen to 26,980,771(World Bank 2010). This study makes it safe to say that the numbers are increasing on a yearly basis with the emergence of new trends in mobile telephony.

Mobile money transfer was introduced in Kenya in 2007 by Safaricom Ltd. which is a mobile and internet network service provider. It was founded in 1997 and today it is in collaboration with Vodafone group Plc. As of December 2010, Safaricom had employed up to 1500 employ-ers who exclude a large number of agents countrywide. The company has about 17 million subscribers (Safaricom Ltd 2012). Its main office is at the heart of Nairobi and others are spread out in the rest of the country; in Mombasa, Kisumu, and Eldoret.

This thesis takes a brief look into mobile money transfer services. The information presented includes a review of Safaricom’s M-pesa service and the use and acceptance of the service in Kenya. Additionally, it outlines how mobile money transfer is being integrated into today’s technologically minded society and especially into the ever growing population in Africa and other parts of the world.

The information presented is just a ‘tip of the mobile money transfer iceberg’ and I hope to delve more into studying this service in the future.

1.1     Background of the thesis

Mobile money transfer as the title states is the process of using mobile telephone applications to do actual banking. This involves depositing, withdrawing and saving money in one’s ac-count. This type of service also allows users to be able to purchase and sell goods and ser-vices in different kinds of business settings. Additionally, users are able to pay their bills through their phones. The main idea behind the emergence of using technology to facilitate money transfers via mobile phones was to create financial awareness to the poorer popula-tions in developing countries, who either had no access to formal banks or could not afford to have a bank account due to expensive rates levied by the banks (Mwangi & Njuguna 2009).

Safaricom Ltd pioneered the text-messaging mobile banking system, M-pesa, in Kenya. “M” is for mobile and “pesa” is a Swahili word meaning money. Three years later, it introduced the loaning savings account for M-pesa called M-kesho. “Kesho” is also a Swahili word meaning “tomorrow”. This service is an option for M-pesa users to help them save their money and also get micro-credit (TechMtaa 2010). Safaricom Ltd set the best example for achieving fea-sibility in mobile money transfer technology and boasts the M-pesa service which has reached a total of 14.91 million people who are now able to deposit, send, receive, loan and save money (Safaricom Ltd 2012). Equally important, users with businesses are able to make pay-ments and do business related transactions through M-pesa. Analogous to this, in Afghanistan, police officers are paid their salary through the local money transfer service, M-paisa (Munford 2010), which is somewhat similar in Tanzania where tax payments are accepted through mobile payments (Tanzania Revenue Authority 2011).

Safaricom’s money transfer and money saving services have proven to be a great success in Kenya and its neighboring countries. The use of the M-pesa system has experienced radical growth since its introduction. The reason for this is because of its efficiency to reach a wider population of users and also promoting financial literacy to the young and old alike (Mwangi & Njuguna 2009).

According to an article in The Economist magazine, the result of having so many subscribers and a flourishing system of transferring small amounts of money has made the M-pesa mobile payment ecosystem to contribute to the Kenya’s GNP. Why? They say that unlike other coun-tries where the mobile money transfer system is being practiced, Safaricom Ltd, in carrying out its practices, faces minimal operational restrictions and limitations from the Government of Kenya (The Economist 2012,16-17).

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