Been receiving lots of questions on Mpesa since I wrote my last blog post. Most of the questions were on how an Mpesa Agent business operates.Hope this article will be useful for persons willing to know about or invest in an Mpesa business but don’t know on how to go about it:-
What an Mpesa Agent does?
- Receiving deposits from customers
- Offerings Withdrawals(give cash) to customers
- Registration of new customers
Acquiring an Mpesa Agent Line (Till)
For you to run an Mpesa Business you will have to be allocated a till with an Agent number. The Mpesa Agent Till operates or runs on a different type of SIM (Subscriber Identity Module Card) which is customized for the above functions of an agent though can also be used for other Safaricom services e.g. Calls and SMS. To acquire an Mpesa till, there are 2 options:-
Applying directly via Safaricom-These involves meeting all the set requirements for being an agent as stipulated by Safaricom. The requirements are available here. The requirements are a bit stringent for some investors who just wish to include Mpesa into their existing businesses as an add-on service. It also takes quite some time for you to get approved. This option suits investors who want to run Mpesa exclusively as their core business.
Applying via Principal Agent -this is the easier option of setting up an Mpesa business. It allows one to setup an Mpesa outlet fast and with fewer requirements than the first option. This option involves approaching a principal (an agent who already owns and manages Mpesa outlets) i.e. his company is registered and recognized by Safaricom as an Mpesa Agent. A principal manages several agents under his company which might be his/her own outlets or subletting. Basically what the principal will be doing is he will be sub-letting you one of his agent tills or will apply for a new till from Safaricom on your behalf. This will normally involve making an agreement-formal or informal. The outstanding thing in this agreement is normally how you will share the commissions typically ranges between 20-30% for the principal and you get to keep the rest. Sometimes you also get to be asked for ‘goodwill’. The principal will also seek to know details about the new outlet e.g. where you intend to locate the till. Once the principal feels secure about your intended new outlet, an Mpesa Supervisor ( Safaricom staff who monitors and evaluates operations of Mpesa Agents) evaluates the new outlet and might give a green or red light depending on whether you meet their criteria for new outlets. Once approved you will need to invest in e-float (money on your Mpesa phone for deposits) and liquid cash for withdrawals, brand your outlets according to Mpesa guidelines and probably some training in AML/KYC policies.
Mpesa Daily Operations.
As an agent, you get to do two major transactions i.e. deposit taking and client withdrawals with both will affect your e-float (phone float) or liquid cash. Let’s start by first explaining these two types of transactions:-
Mpesa Withdrawal-this transaction happens when a customer has e-money on his/her phone and wants to exchange it with liquid cash. This transaction involves the user sending(withdrawing) that value to your agent till via the Withdraw cash option in his phone Mpesa menu. This transaction increases your e-float value but reduces your cash value.
Mpesa Deposit-is the opposite of a withdrawal and it’s when someone’s one has liquid cash and wants to have e-float on his phone. This type of transaction enables Mpesa customers to send money to different accounts, pay for services, buy goods, airtime and other Mpesa based services.
A simple table below explains how they are affected
|Withdrawal||Deposit||E-float balance||Liquid Cash Balance|
From the table above, let’s assume you started your Mpesa business with Ksh 50,000 in e-float and Ksh 50,000 in liquid cash. You will notice that a customer withdrawal will increase your e-float value and reduce your liquid cash by the equivalent value. The opposite happens when you make a deposit for a customer. Well, now how I do get to make money there? When a customer performs a withdrawal, he’s is charged a withdrawal fee depending on the amount he/she withdraws. The higher the value the higher the fee charged. It is from this fees that your commissions from.
We don’t live in a perfect world, and once in a while you will run into situations like having excess e-float or liquid cash. This occurs when you are getting too many transactions of the same type without offsetting transactions on the other side e.g. you get many deposits without offsetting withdrawals, you’ll end up in a situation where you can’t take any more deposits because your e-float is diminished. You will need to deposit money into your principal’s account for exchange of e-float or can deposit cash via another agent. This process of creating a balance between your e-float and cash balances is referred to as Float management. Most banks offer float management services for Mpesa agents who might wish to exchange their excess cash or e-float.
Basically what you do as an Mpesa Agent will be for you to take deposits and accept withdrawals. All these transactions attract different rates of commissions i.e. will greatly depend on the volume and value of transactions you perform throughout the month. Invest adequate funds in e-float and liquid cash,low funds might hurt your agent commissions.
If you have any questions or compliments-feel free to comment on this post.