How Mpesa Agency Business Operates
Safaricom’s Mpesa has no doubt become an inevitable part of our lives today from sending and receiving money,doing bank transactions,paying rent(Lipa Kodi),school fees(Lipa Karo) and shopping(Lipa Na Mpesa). Strange thing though for those that have never been involved in the business have no clue on how it operates in the back end. The Mpesa ecosystem operates in a hierarchy structure from a higher level(bank) to lower tier level of agents and sub agents.Most clients interact with the Mpesa system at the sub-agent level i.e. where you do your cash deposits or withdrawals.For the purpose of this article,we will focus on the sub agents.The numerous Mpesa shops located all across Kenya are mostly sub-agents meaning they operate under a principal agents(another agent but at a higher level). Principal agents are multiple and distinct individual companies which take on the task of managing multiple sub-agents under them.Back to sub-agents,to understand them better we need to understand their role which include:-
- 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 a unique 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 . This option is suitable if you intend to operate Mpesa on a large scale mode e.g. operating multiple tills . The terms for individuals willing to setup Mpesa maybe as an additional business to an existing one or as a small operation is normally very stringent.
Applying via Principal Agent -this is the easier option of setting up an Mpesa business. It allows one to setup an Mpesa outlet faster 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 sub-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 main thing about this agreement is normally how you will share the commissions typically ranges between 20-30% for non aggregated lines and 20:80 on aggregated line model. Sometimes you also get to be asked for ‘goodwill’,not allowed by Safaricom but it exists anyway.The principal will also seek to know details about the new outlet e.g. where you intend to locate the till(actually asked to ascertain if he is giving you to a profitable area,poor locations will attract low commissions which isnt good for both of you) 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.Using this system their actually exists two types of tills.The aggregated Mpesa till and the non-aggregated tills which come with different benefits but to be safe and sure with your Mpesa investment , it is better to go for an aggregated till(Read here on why you should get an aggregated line)
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.
How Do Mpesa Agents Make Money>
All Mpesa 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 inquiries regarding M-pesa we will be glad to help.Leave a comment below.