A well-set M-Pesa agent outlet is a goldmine. This is the reason small-scale investors (and sometimes big investors) keep opening up new M-Pesa agent and sub-agent outlets. With hundreds of thousands of M-Pesa agents across Kenya do you ever wonder why new ones keep registering with Safaricom every day?
It is all about the potential to generate money and hence a sustainable income source. However, you should know that while some agents make as much as Kshs. 150,000 in commissions each month, it is possible to close a month with just Kshs. 4 in commissions.
Setting up an M-pesa Agent or Sub-agent business is an extended topic discussed in a different article I have written. However, this article outlines five specific reason why your new M-Pesa agent shop will fail before you even recover your capital back.
- Location, Location, Location
Earning from M-Pesa is all about volume. And volume is achieved through customer traffic. The more the people who transact, the more the commissions. Commissions are normally issued based on deposits and withdrawals.
Location also matters because the higher the transaction values then the higher the commission. A withdrawal of Kshs. 100 for example earns you a commission of Kshs. 5 while a withdrawal of Kshs. 40,000 earns you a commission of Kshs. 150. If all your customers are withdrawing small amounts then it would take a lot of those customers to make enough income from commissions. A good location means preferably customers with large transactions. This is why most M-Pesa Agents struggle to make anything above Kshs. 20,000 in a month.
- Treating an M-Pesa shop as a standalone business
An M-Pesa agent shop, unless in a high-volume traffic and high-value transaction location, is a supplementary business that is often done alongside other ventures like banking agency, barbershops, salons, FMCG retail shops and groceries. The revenue from being an M-Pesa agent alone could be unsustainable.
- Cashflow ‘float’ issues
This seems obvious at first but it is important. Consistently lacking ‘float’ to carry out transactions drives business away from your M-Pesa shop. The trick is to maintain a balance between electronic balance and hard cash balance. The table below shows how transactions affect this balance;
| Cash Withdrawal | Cash Deposit | Electronic Balance | Hardcash Balance |
| 50,000 | 50,000 | ||
| 10,000 | 40,000 | 60,000 | |
| 15,000 | 65,000 | 45,000 | |
| 5,000 | 60,000 | 50,000 |
Sub-agents are often required to have a float of Kshs. 30,000 at the start and it is important to maintain high levels of ‘float’. This issue has more to do with the importance of being known as M-pesa agent who always has float. People trust you and increase the amounts of transactions they do with you.
- Problematic super-agents/aggregators
Safaricom M-Pesa agency business has super agents and sub-agents. A super-agent is required to have a ‘float’ of Kshs. 500,000, invest Kshs. 100,000 in a sim replacement system (Simex) and is given power to aggregate sub-agents. This means they control operations of at least three sub-agents who can maintain a ‘float’ of at least Kshs. 100,000.
The super-agent is like a recruiter and registers the sub-agents with Safaricom. When Safaricom pays commissions, 80% goes to the agent and 20% goes to the super-agent. The problem is that sometimes super-agents do not register these sub-agents and instead operate them as their own smaller shops. Now that the commission could be coming from the super-agent, such a super-agent decides how much they will give out which could be a 60/40 profit share or worse.
- Good old customer service
“The customer is king”. All businesses survive on good customer service. Your M-Pesa business will not be different. You need to maintain good relationships with your customers in order to build loyalty and keep them coming back. A rude employee at your M-Pesa shop can be all it takes to bring down your business.
Below is an example of how much money an M-Pesa shop in Nairobi made in a month versus business premises costs.
