Passing the Buck: Money Transfer Systems: The Practice and Potential for Products in Kenya

This study identifies the range of money transfer services operating in Kenya and their usage pattern by businesses and individuals, especially low-income earners. The study also analyzes service features and gaps in order to gauge the opportunities and the criteria for developing money transfer products and services in the microfinance industry.

The study finds that:

• Unmet demand exists for efficient, reliable and affordable money transfer services;
• Structural weaknesses in the financial industry in Kenya limit the access to money transfer services, especially in rural areas and for low-income people;
• Microfinance institutions (MFIs) have a potential for providing money transfer services to a low-income market segment through their existing outreach and institutional capacities.

Further, the paper provides detailed information on several aspects of money transfer services:

• Providers and mechanisms used;
• Usage pattern and purpose of transfer;
• Frequency and volumes involved;
• Costs involved;
• Associated risks and problems.

Finally, the study assesses the market opportunities and challenges for MFIs in money transfer services and states that:

• A potential niche exists for MFIs;
• MFIs face difficulty in entering the money-transfer market due to limited capacities and lack of expertise;
• MFIs need to build institutional capacity to successfully handle regulatory and capacity issues.