By Sarah Rotman, David Ferrand, Stephen Rasmussen; published by CGAP (Consultative Group to Assist the Poor); October 2012; 4 pages; available at:http://www.cgap.org/sites/default/files/CGAP-Brief-The-Jipange-KuSave-Experiment-in-Kenya-Oct-2012.pdf
The Jipange KuSave (JKS) Experiment, which was initiated by Mobile Venture Kenya Limited (MVK), a firm in Kenya that has received funding from the World Bank, the Financial Sector Deepening Trust Kenya (FSD Kenya) and the US-based nonprofit CGAP (Consultative Group to Assist the Poor), was executed in an effort to promote savings among poor people in Kenya while offering quick access to borrowed funds. JKS is based on ideas from P9, a loan product offered by Bangladeshi microfinance institution (MFI) SafeSave that is intended to encourage savings, and M-Pesa, a mobile banking service launched by Kenyan mobile phone network Safaricom. The proceeds of JKS loans are instantly transferred into borrowers’ M-Pesa accounts with part of the money put aside as savings. These savings were frozen for each customer until she or he repaid her or his loan in full, at which time the customer could elect whether to withdraw the savings or take out another loan. Clients were able to make repayments directly through their mobile accounts, which reduced field staff costs because on-site visits were only needed at the initial recruitment phase rather than throughout the entire repayment process.
JKS was tested through three phases to evaluate repayment rates and other feasibility factors. The three loan fees were an activation fee of KES 150 (USD 1.73), a two-percent fee on the principal, and an M-Pesa transaction fee that was waived during the first phase. In the first phase, 145 clients were offered an interest-free loan of KES 2,000 (USD 23), one third of which was put in savings. Ten percent of the borrowers repaid their loans within three weeks, 77 percent paid portions of their initial loan within 2 months and defaults ranged between 8 and 16 percent. The second phase introduced the product to 650 clients with half of the loan put aside for savings; a disbursement fee set at 2, 3 or 5 percent; the M-Pesa transaction fee set at either zero, KES 10 (USD 0.12) or KES 20 (USD 0.23); and an activation fee of KES 150 (USD 1.73). An additional feature of the product offered in the second phase was that once a client paid off the first loan, a second loan was automatically disbursed into the M-Pesa account within an hour. In the final phase, 50 percent of the loan was put in savings, 5-percent fee was charged against the principal, M-Pesa transaction fee was KES 10 (USD 0.12) and the activation fee was KES 450 (USD 5.18). Unlike in previous phases, the third group was offered monthly savings bonuses to encourage savings.
The authors conclude that JKS needs modifications in order to be sustainable. For one, in order to have an acceptable return on investment, the authors estimate that JKS would need to recruit 300,000 clients within 3 years, with most maintaining savings levels between KES 15,000 (USD 173) and KES 25,000 (USD 288). Moreover, JKS would need a banking license from Kenyan regulators, which only would be viable if JKS partners with commercial banks. Thus, JKS would not get its own license but rather rely on a partner bank, which would inevitably diminish MVK’s control over the project. The authors state that the three pilot stages did provide important insights into what JKS might do to become a viable business such as knowledge on customer interest in savings features, willingness to pay more for faster services, repayment behaviour being independent of reminder calls, and demand for mobile channels. The authors mention that moving forward providers need to examine customer retention closely, as it is difficult to determine how customers will act once their savings goals are met and they have the option of withdrawing those funds. Additionally, it must be determined whether JKS can sustain itself independently or if the product might be more successful if introduced via commercial banks or deposit-taking microfinance institutions.
By Sarah Benali, Research Associate
Sources and Additional Resources
“The Jipange KuSave Experiment in Kenya,” by Sarah Rotman, David Ferrand, Stephen Rasmussen; CGAP: October 2012, http://www.cgap.org/sites/default/files/CGAP-Brief-The-Jipange-KuSave-Experiment-in-Kenya-Oct-2012.pdf
ICS Solutions Case Study: “Mobile ventures Kenya – Jipange KuSave,”http://www.azureadvantage.co.uk/Downloads/Mobile-Ventures-Kenya-Case-Study.pdf
MicroCapital.org story, March 21, 2012, “MICROFINANCE PUBLICATION ROUND-UP: Peru as a Model for Microfinance Regulation; M-Pesa Mobile Banking E-book; and Geographic Analysis of Thai Enterprise,” https://www.microcapital.org/microfinance-publication-round-up-peru-as-a-model-for-microfinance-regulation-m-pesa-mobile-banking-e-book-and-geographic-analysis-of-thai-enterprise/
MicroCapital.org story, March 12, 2012, “MICROCAPITAL BRIEF: Kenyan Mobile Money Transfer Service M-Pesa Lowers Minimum Transaction Size to $0.12, Cuts Fees for Small Transfers,” https://www.microcapital.org/microcapital-brief-kenyan-mobile-money-transfer-service-m-pesa-lowers-minimum-transaction-size-to-0-12-cuts-fees-for-small-transfers/
MicroCapital.org story, January 18, 2012, “MICROCAPITAL BRIEF: United Nations Capital Development Fund (UNCDF) Event Highlights SafeSave’s Asset-Building Microloan Product ‘P9’,” https://www.microcapital.org/microcapital-brief-united-nations-capital-development-fund-uncdf-event-highlights-safesaves-asset-building-microloan-product-p9/
MicroCapital Universe Profile: M-Pesa
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=M-Pesa
MicroCapital Universe Profile: SafeSave
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SafeSave
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/
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