Update: In July 2011, KickStart reached a milestone by registering its 100th mobile layaway customer. (When we last chatted with Chen, KickStart had 9 such customers.) The group is preparing to launch the service across Kenya next month.
In September 2010, KickStart launched a pilot mobile layaway service to help small-scale farmers purchase irrigation pumps. KickStart is a non-profit organization that develops and markets new technologies to help local entrepreneurs establish new small businesses.The mobile layaway service allows farmers to make incremental payments over a mobile phone by leveraging M-PESA, a mobile banking platform that is popular in Kenya and elsewhere.
The mobile layaway service is referred to as Tone Kwa Tone Pata Pump, which is Swahili for “Drop by Drop Gets the Pump”. Though only nine customers have signed up for the service since the pilot was launched one month ago, the experience has provided insight on future approaches for an expanded mobile layaway service.
Generally, KickStart’s mission is to help people out of poverty in Africa by promoting sustainable economic growth and employment creation. One outlet is a line of manually operated MoneyMaker Irrigation Pumps that allow farmers to irrigate up to two acres of land. As of August 31, KickStart has sold 156,000 pumps and 99,900 enterprises were created across many African countries, including Kenya, Tanzania, and Mali.
From Informal Layaway to a Formalized Service
There are no KickStart retail stores where farmers can buy pumps. Instead, MoneyMaker pumps are distributed to and sold at third-party hardware stores or agrovet dealers who are already selling other products like seeds and fertilizer to small-scale farmers.
One aspect of KickStart’s theory of change is the importance of engaging the private sector. Charlene Chen, product manager of services for KickStart, said that the goal is to alleviate poverty through income and wealth creation, which means providing tools like the MoneyMaker pumps, as they are called.
As KickStart sales reps visit farms, advertise, and demonstrate the irrigation pumps in front of retail shops, they also capture sales leads and customer information that is analyzed by KickStart.
From this, KickStart found two main barriers for farmers when it comes to buying irrigation pumps. One is lack of access to a water source. The second is lack of access to finance. For some farmers, the price was just too high. For others, it wasn’t so much an inaccessible price point as it was difficult to gather that much cash at one time.
KickStart found that many rural farmers were interested in the pumps but lacked formal savings mechanisms and had difficulty saving up for larger purchases. Chen said there is a shortage of savings mechanisms that are geographically convenient for rural customers, inexpensive, and that do not require collateral or logistical requirements such as a national ID number.
Informal layaway was already happening at an individual level through trusted relationships between some farmers and dealers – in which farmers would pay little by little for pumps and other supplies and receive the products upon completion of payment. Chen said that a survey of the dealers involved with the mobile layaway pilot showed that all offered some sort of informal layaway, but almost all involved cash transactions and not all farmers had a trusted relationship with a dealer. So KickStart drew from their history of appropriate technology and developed a formalized layaway service by leveraging M-PESA and SMS-based mobile technology.
The formalized service “takes it to the next level by stamping it with the KickStart brand” and by leveraging M-PESA, a very trusted brand, Chen said. “It adds an element of convenience and helps mitigate the risk for the farmers, assuming they can learn to trust the KickStart brand in the same way.”
The goal of the mobile layaway service, Chen said, is to provide a safe, secure, and convenient savings mechanism for farmers to put away money for an irrigation pump.
How Mobile Layaway Works
For the pilot, KickStart worked with 16 dealers in three locations in Kenya: the Western Region, the Nyanza/Rift Valley Region, and the West Aberdares Region.
If a farmer decides on mobile layaway, they fill out a basic paper form and contract with a KickStart sales rep. The form asks for contact information, nearest town, and the specific product requested. The rep then sends an SMS message to the organization’s office including name of customer, the product they selected and their mobile number.
The message is recorded in the office and a confirmation SMS message is sent to the farmer that says, “Congratulations, you are now registered for Tone Kwa Tone. Please make an initial deposit of X shillings.”
For now, KickStart is asking for a deposit of about 30 percent of the total cost. Chen said this was in important distinction because the deposit was large enough to take the commitment seriously and practical enough to not be a burden to complete a full payment later. (A MoneyMaker hip pump runs $35 USD or 2749 Kenyan shillings and a Super MoneyMaker Pump is $95 USD or 7490 shillings.)
To use the layaway service, farmers have to be registered with M-PESA. Chen said that this requirement is not a barrier because of the prevalence of the mobile banking program in the area. (There are more than 9 million registered M-PESA users in Kenya.)
KickStart leverages a feature called “Pay Bill,” which is a built-in SIM service offered by Kenyan mobile provider Safaricom on the M-PESA platform.
Using Pay Bill, farmers enter a business number and their customer account number, which for the mobile layaway service is the farmer’s cell phone number — something easy to remember and not particularly sensitive. The next prompt is to enter the amount to pay, which must be a minimum of 100 shillings or a little more than $1 (an M-PESA requirement.) Customers then enter an M-PESA PIN number.
Payments can be made in any frequency so long as the full amount is received by the end of third full month after registering. Based on customer surveys, the three months seemed “aspirational but not punitive,” Chen said. Customers also incur a one-time service fee that is charged up front and is non-refundable if, say, the farmer backs out of the plan at a later time.
After a deposit is made, the data is sent to two locations. One is the M-PESA administration tool, an online system provided by Safaricom to log in and see all received payments. The other is a USB modem with a SIM card that is located in the office and tied the KickStart M-PESA account. Every time a payment is made, KickStart receives a text message on the SIM card that says, “You received X shillings from user Y.”
The advantage to using this text message interface, Chen said, is that she is not sitting in front of a handheld mobile phone trying to type text messages. Rather, when the USB modem is plugged in, all the administration can be done on the computer. From here, Chen can then send a confirmation and update to the farmer via SMS.
Lessons from the Mobile Layaway Project
Though the USB modem and text message interface alleviates the need to administer data via a handset, it still requires significant manual input. For the pilot, received payments come in automatically from the M-PESA admin tool, but on the back-end, Chen and others are using an Excel spreadsheet to track customers and payments.
Notification via the USB modem is instantaneous and helpful, Chen said. As each payment comes in, she records it and adjusts the current balance. She is able to tell what the remaining balance is and send this information via SMS to the customer. Still, it must manually re-recorded and adjusted in Excel, and it is instantaneous assuming it comes in during a working hour.
KickStart is not alone in this regard to this challenge. Chen said that other entrepreneurs have complained that Safaricom has not yet provided a formal API between the online administration tool and back-end systems. “If you wanted to export the payments, you would have to export to Excel or PDF, but it’s completely static,” Chen said. Something that is especially significant when dealing with people’s money and secure transactions.
Whereas wealthier social enterprises can hire ICT consulting firms to parse the data and develop software and logic to keep track of SMS messages and outstanding balances, others may be restricted to a more manual, less secure system.
Leveraging a trusted brand like M-PESA is integral to the success of mobile layaway, but this relationship may produce a barrier to mobile layaway in countries where mobile banking is less established or trusted.
Chen wonders if the mobile layaway service would have as much success in other countries. In Tanzania, for example, M-PESA is offered through Vodafone, and mobile banking service ZAP is offered through provider Zain, but the overall uptake is less significant than in Kenya. “I think this is a special phenomenon we recognize which may make mobile layaway more successful here in Kenya than anywhere else,” Chen said.
Successes and Next Steps for Mobile Layaway
Though only nine customers have signed up, the mobile layaway service is successful in it’s approach: it offers a more secure, formalized service by building upon something already being done informally. And it leverages a trusted brand that users have access to and are comfortable with.
Chen said the pick-up is on the slower side, but offers a few reasons why. First, mobile layaway is “really innovative” for KickStart — it is the first time they are offering a service and not a physical product.
Selling a service is new to many of the sales reps, too. “As we adapt as an organization, it’s also about transforming the way that our sales force interacts with the customer,” Chen said.
Finally, the pilot project follows KickStart’s theory of change and need to engage the private sector. KickStart’s belief is that self-motivated private entrepreneurs managing small-scale enterprises will play a dynamic role in the economies of developing countries.
“If we could figure out an even more effective, efficient way to help entrepreneurs and small-scale farmers create income, then that’s what we would do,” Chen said.
KickStart plans to run the pilot for five months. The goal, Chen said, is not to get to scale but to understand customer demand, operational feasibility, and technical requirements. The next phase will include scaling out to more dealers in different regions in Kenya.
Photos courtesy KickStart.