This is an interesting piece from kachwanya on this topic that will soon dominate the narratives in Nigeria. The perspective was on Kenya but this will play into Nigeria also as we are just starting this game.

They are the real force behind the growth of mobile money across Kenya.  Probably you are like me and you are wondering what really make them tick. Yes, I am talking about the mobile money agent business and I was happy when I came across the presentation by  Piet Biemans during AItec Conference Banking and Mobile Money COMESA.

Here  are the  nine drivers to the agent Business Case based on research in Brazil, Kenya and India according to CGAP:

•  Role-related

1. Up-front capital ‘acting as an agent can be a very capital-intensive business. CGAP’s research found M-PESA agents needed to acquire an average of US$ 1600 in capital in order to start operating as an agent.’

2. Liquidity management ‘liquidity management has two components: (1) accumulating adequate e-float and cash, and (2) the act of rebalancing the two’

3. Rigid staff and space expenses ‘a rigid cost “floor” that leaves the agent with much less flexibility on how many transactions are needed for the agent business to be attractive’

•  Exogenous

4. Security risk ‘robbery risk has two implications for agent costs. The amount of upfront capital an agent requires to begin operating can be increased by the cost of security improvements. But much more substantial is the expense from actually being robbed’

5. System reliability ‘losing a few days of business may be enough to make the month unprofitable’

6. Effect on other line of business ‘the bulk of agents will have a pre-existing business that continues to be important ‘

Time-specific

7. Adequate revenue at start-up ‘sufficient capital to fund losses until the cash flow turns positive’

8. Major costs with growth ’as the level of customer activity grows, agents will incur additional expenses like extra staff member and improved premises’ 

9. Fragmented demand across too many agents ‘the ratio of customers to agents is a key driver of agent network revenue, but the ratio can deteriorate even after it reaches an optimum point’