M-pesa utility, operation and entrepreneurial innovations by small enterprises in kenya




Дата канвертавання25.04.2016
Памер80.66 Kb.
M-PESA UTILITY, OPERATION AND ENTREPRENEURIAL INNOVATIONS BY SMALL ENTERPRISES IN KENYA
Erastus Thoronjo Muriuki,

PhD Entrepreneurship

Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

ethoronjo@gmail.com

Abstract

The introduction of the M-pesa in Kenya has been recognized as a key strategy for economic development and poverty reduction in developing countries, particularly in developing countries. Since their independence, most economies have been promoting the development of small enterprises as a means for economic growth. More recently, due to the increase of unemployment and poverty, there has been a renewed focus on the promotion of small businesses not merely as an engine for growth, but more importantly as the key to job creation and poverty reduction. M-pesa services and innovative transfer of transformed the push and pull technology greatly and enhancing business development in Kenya. Small enterprises have high failure rates which are enormous for most economies with limited capital and other resources. The combined failure rates for businesses and barriers increases unemployment rates and perpetuate poverty. In the light of the above, it seems necessary to call for a special issue to address the problem surrounding small business development with the hope of encouraging more innovativeness on M-pesa service by small entrepreneurs. This research study was therefore motivated to determine whether the speed of service delivery, cost effectiveness, efficiency affect the demand for innovations of the services of the small enterprises and how innovations on speed of service delivery, cost effectiveness and efficiency affect the performance of the small enterprises.

A survey was conducted randomly within Nairobi town and the residential places in the other eight parts of Kenya. A questionnaire was provided to the selected samples of the micro enterprises in the selected places. In the survey a total of 409 respondents completed the questionnaires out of the 2000 distributed originally. The total number of those who returned well answered questionnaires and which were indeed used in this study was 381.

This study found that there exist a positive correlation between M-peas services and the level of their perceived low costs, ease of their operations, efficiency and the speed of transaction. Further it is evident most of the constructs and a major impact on the demand and the desire to use the M-peas services. This indicates that those small enterprise owners who use the m-payment services also acknowledge the existence of all the perceived variables used in this study and the positive attributes with the use of m-payment services in Kenya. However, there exist a low degree of correlation between the perceived support from the government and the actual use of the M-payment services in Kenya. The study revealed that M-payment in Kenya is rapidly penetrating within the country especially in the small enterprises and the micro business.

From the findings of this study, the government and the mobile service providers can promote the growth of the small enterprises especially those which deal with M-payment by providing means of decongesting the lines, increasing the maximum daily amount of money in the m-pesa accounts from the current amounts to facilitate more transactions by the people and providing enough security to the services and creating awareness to the public on how to keep their accounts secure and their PIN codes.

Key words: M-pesa; utility; entrepreneurial services; innovations; small enterprises

1 INTRODUCTION AND RESEARCH OBJECTIVES

Small enterprises have been known to play very crucial role in the development of economies and improvement of the entrepreneurial skills of the people. The above contribute immensely towards creation of sustainable development in the third world countries. However, these micro enterprises suffer the challenge of limited technology and poor infrastructure which leads to loss in competitive advantage in the global scene.

Small enterprises mainly employ less than 50 workers. These, have been known to be the backbone of many countries economic growth (Liedholm and Mead, 1999). Sustainable development implies the ability to meet current needs and seeking ways for the future generations to own their living also. In less developed countries sustainable development aims at eradicating poverty through the associated benefits of industrial and economic development to the less privileged in the so cities.

African economies have been seeking ways of growing the small enterprise businesses through improving the skills and technology in this very seemingly vital sector. The, projected growth and upgrading of the small enterprises into medium and large enterprises has not yet been achieved (Lukac, 2005). Such transition would have been so important towards the growth of many African economies.

In Kenya, small enterprises have embarked on the use of m-payments in their transactions because they are cheap and affordable to them. Many transactions are carried out by the use of mobiles such as payment of bills, sending cash, withdrawals, payment of goods and services. Today, the services have been made cheaper by the lowering of the value of calling cards unto as low as those of twenty shilling. This has made many small enterprise owners to access the services (cck, 2008/2009). In 2007 a study by Arunga and Kahora found that sole proprietors and small enterprise businesses reaped more benefits by using the mobile payments as they could make savings or access many customers and do more services than before.

This research therefore seeks to find out the relationships that exist in the operations of the small enterprises especially the entrepreneurial services and innovations. The survey is centered one case of these innovations by the small enterprises: M-pesa utility services in Kenya. The study seeks to establish the factors which influence the small enterprises to come up with new innovations in their operations. These factors are assumed to be related to the demand for innovations by the small enterprises.



Conceptual framework


Independent variable dependent variable

Figure 1: Hypothesized relationship between operations of small enterprises and innovativeness in entrepreneurial services of the small enterprises.

The factors above are hypothesized to influence the level of innovations in the small enterprises in Kenya. This is because they represent the general objects of most of these small enterprises which form the basis of the operations of their activities. The study will focus on how each affects the level of innovation of theses small enterprises in their operations.

This study undertook an analysis on the two constructs of innovation and efficiency of the small enterprises motivated by the following objectives:


  1. To determine whether speed of service delivery, cost effectiveness, efficiency affect the demand for innovations of the services of the small enterprises.

  2. To establish how the innovations on speed of service delivery, cost effectiveness and efficiency affect the performance of the small enterprises.

This study therefore seeks to establish those challenges affecting the operations of the small enterprises. The paper also provides an analysis of how the need for speedy operations, cost effective, accessibility and ease of operation leads to the highly innovated ideas of the small enterprises.

2 THEORETICAL BACKGROUNDS AND INFORMING LITERATURE

According to Schmitz, (1995) the desire to remain efficient is what has been the major drive for many small enterprises in Kenya. Being efficient is brought by cluster of varied factors ranging from the emergence of suppliers, marketing agents, new service providers, specialized products, forming consortia, gathering of skilled labour and associations which are specified by services and continued lobbying.

Infrastructural developments are very crucial in developing successful links within the clustered SMEs. Planning for the infrastructure therefore starts when location choices are made and eventually spark spatial distribution of industry compared to other aspects of the society. Planning for spatial distribution will ensure that efficient utilization of the available land is achieved by balancing the competing factors in the scene of sustainable development (Rozee, 2003). It is a continuing business, of managing dynamics of nature by a range of factors in the context of sustainable development (Tewdwr, 2004). This network based system in planning for the infrastructure combines mechanisms of competition and the rules of behavior. This eventually takes advantage of differentiation and learning (Ombura, 1997). It concentrates on attracting infrastrucral facilities for use in networking economies. Small enterprises on manufacturing sector reflects systems of high interactions between technology and the advancement in infrastructure which determines the trends of in the collective and networking environment. The above underscores the importance of infrastructural planning to consider promotion and development of requisite technologies.

In addition to creation of jobs small enterprise also are known to be avenues of innovation and entrepreneurial growth. Indeed, in majority of the third world countries the micro enterprises have greatly contributed to establishment of self-employment (Lukacs, 2005). In europe for example a study done by (Eurostat, 2008) indicated that two thirds of employment came from the small enterprises while a similar study in Pakistan in done by scholar Bashir(, 2008) indicated that 80 percent of the of non-agricultural employment came from the small enterprises which contributed to nearly 40 percent of annual Gross domestic product(GDP). In the countries where majority of the people are low income earners a study done by Luckas (2005) indicated that micro enterprises account for about 60 percent of the GDP and more than 70 percent of employment opportunities. According to luckas most of theses micro enterprises faced the challenge of poor production methods leading to low quality of products, low levels of production, local and narrow markets for their products among other challenges. He highlighted the lack of technological advancement as the major block towards the advancement of the small and large enterprises into medium or even large enterprises. Small enterprises in less developed countries can be divided into two main categories: a) geographically segmented enterprises which mostly concentrate on agricultural activities and are found in the rural areas and, b) clusters of small enterprises mainly found in the urban and sub urban areas (Nadvi, 1999)

In Kenyan today, the manufacturing micro enterprises are mainly found in jua kali sheds. Jua kali is Swahili word which means hot sun, since small enterprises mainly operate under the sun and in the open (Nadvi, 1999; Schmitz, 1995). The advantage of theses clusters is that they enjoy the efficiency and flexibility which individual producers may lack. Cluster model deals with growth processes of local firms. Hence, it is of great importance to explore how these small and medium enterprises can be transformed into medium and large enterprises in Kenya. This could be achieved better by assisting the clustered firms and not the individual ones (Schimitz, 1995)

2.1: Technological Change

Information systems brought by the small enterprises was a big booster to the dissemination of information in the market for the small enterprises in Kenya. This is because they are more efficient and thorough compared to other methods. Today, many small and medium enterprises who invest in information system and information technology focus on cost. According to Hagman and McCahon (1993) the adoption of IS by the small enterprises as having brought competitive advantage. Recently Powell and Levy did a study on the small enterprises operations’ and reported that micro enterprises align their information systems in accordance to the strategies so as to realize the cost advantages and value added benefits.

Advancement in technology has also created a very big challenge to small business on adoption basis since it is sometimes costly and the small enterprises lack the know how of the technologies. According to Powell (2000) even with the improvements in technology. Little has been achieved as very few were able to use the new upcoming technologies. He pointed out that some were unaware of new technologies and if they knew the technology was either unavailable or unaffordable to them or away from their local settings. This meant that foreigners still remained on the fore front in accessing technology and enjoyed the efficiency gains associated with it, creating a gap in production between local and foreign small enterprises.

2.2 Small entrepreneurial services: A case of m-pesa services

Most small enterprises have embarked on the use of mobile methods of payments this is because it is cheap for them in delivering cash to their creditors and business partners, could be used anywhere and any time (Anurang, Tyagi and Raddi, 2009). By the year 2006 there were 183 banking and mobile services of making payments in Kenya (Porteous, 2006). He even suggested that there could be more people with mobile handsets than those who had bank accounts.

Mobile payment services have made the small enterprises to make direct transactions with their customers without going to the banks and even going to their services premises ((Anuradi, Tyagi and Raddi, 2009). They suggested that the services were beneficial since it only required one to posses a phone and have the basics of literacy in operating the phones. Similarly, the system did not require any physical infrastructure like the wires and was accessible to very large portions of the population (Elder and Rashid, 2009); lastly the services could be done in a speedy manner than before. The above features have made the operations of the small enterprises to be so fast to operate with ease. The mobile payment agents are well distributed in the country such that the there is ready accessibility of the payment services to the small enterprises and also they are able to access their accounts any time.

2.2.1Transaction Costs

The costs associated with the sending of money using the mobile payment services is also very low as compared to those from the commercial banks and other money transferring companies (Omwansa, 2009). This is true since the cost of a transaction has a direct influence to the consumer if it is passed to them (Mallat, 2007). Traction costs are supposed to be low if the transactions have to remain competitive. The co9st of the mobile payment services should be low than those of the banks and affordable to the micro enterprises. Recently there are many mobile handsets which are easy to operate and have the same functions as those of the banks.



2.2.2 Speed and usability

According to the findings of a study done by Pagani (2004) most people described the current technology has user friendly, he also suggested that it is the usability, usefulness, ease of service operation and speed that people considered as bringing efficiency in the use of the mobile payment services. By the end of 2009, there were more than 6.175 million known and registered m-pesa customers. The rate of registration per day stood at 11,580 (Annual report Safaricom, 20008/2009) the above figures indicates the wide use of the mobile payments in Kenya and the satisfaction.



2.2.3 Easy accessibility

Accessibility is the ability to reach people. It is one of the main benefits of the mobile payment services (Pagan (2004). Small and the medium enterprises form the biggest number of those most benefiting from the use of the m-payment services. According to an Annual report from Safaricom (2008/2009) by march, 2009 there were 8,650 M-pesa agents through out Kenya. These services have made the micro enterprises to save more time and go to the bank less often. The saved time is spending in their businesses. Similarly, the unbanked in Kenya now can sent and receive money in Kenya (Omwansa, 2009). The use of the m-payment services is also attributable to the fact that most of the Kenyans are familiar with the technology of the phones and require no formal training.



2.2.4 Actual Usage of the Mobile Payment and business performance

The high rate of use of the mobile phones and the transactions of the m-pesa in Kenya points to the fact that there are more Kenyans with the m-pesa accounts than those with the bank accounts. This could to be due to the low transaction costs of sending and receving money compared to the olden means and the banks. Secondly,, they are quicker than the rest of the methods to person transactions had the value of Kshs. 120.61 billion for the financial year 2008/2009 and the same had risen up to Kshs. 135.38 billion by the end of march 2010 (Annual report from Safaricom, 2009/2010). According to Vaughn (2009) this was reflecting how fast and deep the services were reaching the unbanked in the society. The benefits accruing the use if the services are so huge that those who tried to frustrate the use of the services felt the guilty of it (Omwansa, 2009)



However, the degree of influence of the mobile payment to the operation performances of the small enterprises largely depends on how conducive the environment is (Porteous, 2006). According to porteous an environment is conducive if it has a set of conditions which enhanced a trajectory of developments in the market. This is particularly on the environments where wide spread access could be rampant. M-pesa in Kenya is spread wide but requires a conducive environment to improve the welfare of tits consumers. In Kenya the small enterprise are mostly clustered around the markets and the shopping centers providing the micro enterprises the ability to register and transact with the other traders or their clients more effectively and efficiently as they are widely distributed in Kenyan markets and places which receive huge gatherings.
Table 1 Trend of Mobile Payment Service M-Pesa




2008 march

2009 march

Growth rate of the mobile payment service


Number of registered customers


2.075 million


6.175 million


198%


Number of retail outlets


2,262


8,650


282%


Number of person to person transactions


14.74 billion


120.61 billion


718%


Average registrations per day


9,965


11,580


19%


Source: Safaricom Annual Report, 2008/2009

3 RESEARCH QUESTIONS


  1. Does the speed of service delivery, cost effectiveness, efficiency affect the demand for innovations of the services of the small enterprises?

  2. How do the innovations on speed of service delivery, cost effectiveness and efficiency affect the performance of the small enterprises?

4 RESEARCH DESIGN


A survey was conducted randomly within Nairobi town and the residential places in the other eight parts of Kenya. The reason for using the survey method was that it provides a quantitative data of the experiences, views and even attitudes of the population chosen as the sample (Creswell, 2003; Viehland and Leong, 2007). A questionnaire was provided to he selected samples of the micro enterprises in the selected places. The research questionnaires included the factors from other previous studies (Davis, 1989; Venkatesh and Balla, 2008). The respondents completed and provided the answers voluntarily. In the survey a total of 409 completed the questionnaires out of the 2000 distributed originally. The total number of those who returned well answered questionnaires and which were indeed used in this study was 381. This was after a rigorous process of checking for completeness, plausibility and integrity for the purposes of ensuring quality of the study was high and remained reflective.

In the study four independent variables were use after identifying their factors. They were subjected into a measuring scale of likert using the five-point scale. The scale had anchors from the 5 (very great extent) to 1 (not at all). These were low cost, accessibility, ease of operation and efficiency. The respondents’ data on their demographics were collected using the single item structured questions. These were gender, years of business, age of the agents and the period of use of the mobile payment services.



5 DATA ANALYSIS

From the original number of questionnaires distributed four hundred and nine questionnaires were returned. This represented a response rate of ninety one percent. The questionnaires were thoroughly checked for plausibility and completeness leading to a remainder of three hundred and eighty one questionnaires.



Gender of the respondents

The researcher requested to know the gender of the respondents. Figure 1.0 below shows the results in a pie chart.



From the findings of the study there were more male (54%) than female (46%) respondents.



Age group of the respondents

The researcher requested to know the age group of the respondents. The results are in figure 2.0 below.



From the findings of the study there were 107 aged between the ages of 18-24, 217 aged between 25-35 years and 57 respondents had the age of 36 years and above. The results shows that there were more (57%) youths (25-35 years), followed by the junior youths (18-25) with 28% percent and lastly the senior (above 36 years) youth (15%).



Duration of the respondents in the business

The researcher requested to know the number of years the respondents had spent in the business. The results are given in figure 3.0 below.



From the findings, 41% percent of the respondents had worked in the business for less than a year, 40% percent had worked in the business for a period between (2-3 years), and 11% had worked in the business for a period ranging from (3-5 years) while 8% percent had worked in the business for more than five years. The findings indicate that majority of the respondents had been in the business for a period below three years.



The bivariate relationship of the factors

Pearson’s correlation coefficient was used to determine the bivariate correlation of the variables (factors being studied). Pearson’s correlation gives the degree to which two variables correlated and the direction of the correlation. Table 2 below presents the findings of the Bivariate Correlation analysis. It shows the extent of correlation between the variables and also highlights the direction of the correlations. The variables showed correlations ranging from 0.25 to 0.75. These are moderate correlations. The study revealed no negative correlation of the variables.



Table 1: Factors which necessitate the use of M-pesa in Kenya





Not at all

Low Extent

Moderate Extent

Great Extent

Very Great Extent

Mean

Std. Dev.

Ease of operation

3

9

19

13

11

3.4

1.1

Lower cost (of doing business)

1

5

23

18

8

3.5

0.9

Accessibility

3

8

22

13

9

3.4

1.1

Efficiency

2

10

19

13

11

3.4

1.1

Higher Profit

1

7

23

15

9

3.3

1.0

Table 3 shows the response on the usage of M-pesa service outcomes as a result of the benefits associated with. A five-point Likert scale was used to interpret the respondent’s extent. According to the scale those factors which were not considered at all were awarded 1 while those which were considered to a very great extent were awarded 5. Within the continuum are 2 for low extent, 3 for moderate extent and 4 for great extent. Mean and standard deviation were used to analyze the data. According to the researcher those factors with a mean close to 3.5 were rated as to a very great extent while those with a mean close to 3.0 were rated to a low extent or even not considered at all. On the same note the higher the standard deviation the higher the level of variations or dispersion among the respondents.

6 DISCUSSIONS OF THE RESULTS

From the findings in table 2 above there exist a positive correlation between M-peas services and the the level of their perceived low costs, ease of their operations, efficiency and the speed of transaction. Further it is evident most of the constructs and a major impact on the demand and the desire to use the M-peas services. This indicates that those small enterprise owners who use the m-payment services also acknowledge the existence of all the perceived variables used in this study and the positive attributes with the use of m-payment services in Kenya.

However, there exist a low degree of correlation between the perceived support from the government and the actual use of the M-payment services in Kenya at 0.170. This indicates that small enterprise users of the m-pesa business look forward to getting support from the government and the service providers. This could be informing of the decongestion of the lines or even regulation of the services by he government. The other factors however, show that the use of the m-pesa services is beneficial to them with reference to cost of transaction, ease of operation and efficiency.

From the research findings, the effect of M-pesa on lowering the cost of doing business was regarded to a very great extent with a mean of 3.5 and a standard deviation of 0.9, the effect of M-pesa and the ease of operation was regarded with a great extent mean of 3.4 and standard deviation of 1.1, accessibility was regarded with a great extent with a mean of 3.4 and standard deviation of 1.1 .while efficiency in operations was regarded to a great extent with a mean of 3.4 and standard deviations of 1.1 .for the first two aspects and 1.0 for the last two. The effect of M-pesa usage on profitability was regarded to a moderate extent with a mean on 3.3 and a standard deviation of 1.1.

The research findings especially as interpreted by the standard deviation, clearly demonstrated the correlation between the use of m-pesa in business and key strategic performance outcomes (building blocks to sustainable competitive advantage) against which sustainable competitive advantage is achieved. As such, there is a linear relationship between the invention of M-pesa services in Kenya and the performance outcomes.

7 RESEARCH LIMITATIONS

Although this study is highly useful, it suffers some notable limitations. Firstly, the study did not differentiate between the informal and the formal small businesses hence a further study is recommended on this area. Secondly, small enterprises operate in all forms of activities. This study did not differentiate the various activities and the results should be treated with caution. This provides an avenue for further research.

Thirdly, no studies in the past have considered the success and growth factor in the micro business as a result of using the mobile payment. Further research covering a wider scope of the small enterprises to refine these results is needed.

Finally, the study did not look at gender in micro-business vis-à-vis the use of mobile payments. Further study in this area remains an avenue to be explored in the future.



8 CONCLUSION AND IMPLICATIONS

The findings of this study compliments to the pool of the existing literature in various ways. The findings indicate that perceived ease of operation, efficiency in the use, cost effectiveness and speed of operations were all positively correlated. Some previous study highlighted the ease of operation as one of the major aspects that motivated the use of m-pesa services in Kenya (pousttchi, 2003). These findings reflect the associated benefits with the use of the m-pesa services in Kenya. Further most of those who returned the questionnaires were of the opinion that the services were easity accesssibile to most people than the banks

M-payment in Kenya is rapindly penetrating withinthe country especially in the small enterprises and the micro business. The findings of this study confirm the earlier hypothesis of the study that the desire to operate easily, less costly, speedily and with efficiency influences the rate of innovational adoption of the m-pesa services in Kenya. The results of the study are useful to the Kenyan small enterprises M-pesa agents in particular they provide greater support and enhance the customer’s ease of operation to use the technology.

From the findings of this study, the government and the mobile service providers can promote the growth of the small enterprises especially those which deal with M-payment by:



  1. providing means of decongesting the lines

  2. Increasing the maximum daily amount of money in the m-pesa accounts from the current amounts to facilitate more transactions by the people.

  3. Providing enough security to the services and creating awareness to the public on how to keep their accounts secure and their PIN codes.

These measures will go along way in motivating the mobile payment users and even enhance the growth of the small enterprises in Kenya.

The study has identified very significant factors which influence the success of the small enterprises i.e. M-pesa operators in Kenya. These factors which include: reduced cost of transactions, easily and widely accessible services, easiness of operations of the m-payment services and the user friendliness (efficiency in the use) come with the use of the M-pesa services. They represent the innovations which have been useful to the small enterprises in Kenya.


References


Anurag, S, Tyagi, R, and Raddi S (2009). “Mobile Payment 2.0: The Next-Generation Model,” in HSBC”s Guide to cash, Supply Chain and Treasury Management in Asia Pacific.Ed.178-183.

Arunga J, Kahora B (2007). Cell phone Revolution in Kenya. International Policy Network.

Bashir, A. F. (2008). The Importance of SMEs in Economic Development. Banking, Finance and Accounting Community. http://www.thefreelibrary.com/the importance of small and medium Enterprises I the Economy.

Business Daily, April 18, 2009. “Minister orders audit of Safaricom M-Pesa service”. http://www.bdafrica.com Accessed on 18th April, 2009

Creswell, J. W. (2003). Research Design: Qualitative, Quantitative, and Mixed method Approaches, 2nd ed. Sage Publication, Thousand Oaks, California.

Eurostat (2003). Enterprise by Size Class-Overview of SMEs in the EU. Statistics in Focus 31/2008.

Liedholm, Can and D. Mead, (1999). Small Enterprises and Economic Development: The Dynamic Role of Micro and Small Enterprises. London; Routledge.

Lukacs, E. (2005). The Economic role of SMEs in World Economy especially in Europe. Journal of European Integration Studies, 4,1

Mallat, N. (2007). “Exploring Consumer adoption of Mobile Payments- A Qualitative Study”. The Journal of Strategic Information Systems, 16 (4), 413-432.

Nadvi, K. (1999). Facing the Competition Business Associations in Developing Country Industrial Clusters. Discussion Paper DP/103/1999, Geneva: International Institute of Labor Studies.

Pagani, M (2004). “Determinants of Adoption of Third generation Mobile Multimedia services”, Journal of Interactive Marketing, 18 (2).

Porteous, D. (2006). The enabling environment for mobile banking in Africa. London: DFID.

Safaricom, (May, 2009), Financial Year 2008/2009; Annual Results Presentation and Investor update.

Schmitz, H. (1995). Collective Efficiency growth path for Small-Scale Industry. Small enterprises training and technology project (MSETTP) draft report two 15- 5-1998. Ministry of Research and Technology. Nairobi

Tewdwr, Mark-Jones. (2004). Spatial Planning: Principles and Culture. Journal of Planning and Environment Law. May 2004.

APPENDIX 1


Table 2: Pearson correlation




paccess


pcost


pconvenience


psupport


actualusage


biu


paccess


1
















pcost


.562(**)


1













pconvenience

.541(**)


.379(**)


1










psupport


.330(**)


.321(**)


.430(**)


1







actualusage


.265(**)


.240(**)


.322(**)


.170(**)


1




biu


.398(**)


.303(**)


.657(**)


.528(**)


.208(**)


1

** Correlation is significant at the 0.01 level (2-tailed).



* Correlation is significant at the 0.05 level (2-tailed).



База данных защищена авторским правом ©shkola.of.by 2016
звярнуцца да адміністрацыі

    Галоўная старонка