Formalizing the informal sector using Lipa Na M-Pesa
During the Covid-19 cash, payments have been highly discouraged so as to reduce the spread of the virus. Personally I will frequent a shop with a Lipa Na M-PESA banner displayed. Lipa Na M-PESA is a mobile platform by Safaricom that enables customers to pay for products or services.
One such vendor I decided to buy from is Moses Kibuthu from Clay City ward AKA Brown. He sells pineapples using a Mkokoteni(Cart). I was curious and decided to ask why he decided to have a Lipa Na M-PESA as I ate the Ksh.20 worth juicy pineapple and making my payments on you guessed it.
“I had an incident where one of the customers bought 3 whole pineapples and sent money directly to my personal number.” Brown narrated. Later on, he heard a message notification however he did not pay much attention since he was busy serving the clients. Later he realized that the same client had reversed the 150/= sent. This saddened him since raising a complaint would be fruitless. Frustrated, he walked to the Mwiki, Safaricom customer Agent and opened his Lipa Na M-PESA account.
Benefits of using Lipa Na M-PESA
He states that the Lipa Na M-PESA has enabled him to plan his financials really well. He can track his sales and purchases using text messages. It has also enabled him to have the discipline of separating his personal and business finances. Brown has now become the Lipa Na M-PESA ambassador for other traders who have shops bigger than his to join the platform. I finally understand why my grocery guy, Wakamunya, recently opened one too.
The platform Lipa Na M-pesa has been undergoing various innovations to improve on both the customer and business experience. Recently, Safaricom launched an APP dubbed “M-pesa for business” which will provide businesses with real-time tracking of the business performance.
Brown demonstrates how formalizing informal markets is very possible. The bureaucracies that exist in forming a company are bypassed when you simply acknowledge that Brown is the business himself who trades in groceries. He has no specific location since, he moves around with his cart (Mkokoteni) but operates in a specific zone Clay city Ward, Kasarani. Instead of bank statements, M-pesa Statements can be used by financial institutions interested in offering financial services. The county council aka Kanjo also needs to see how they can license him based on the business model
The government and county council approach to formalizing the informal sector has been more of the mountain coming to Moses as opposed to Moses going to the mountain. That is, the government should work with the informal sector by first appreciating their business models and find a way to remove their barriers to trade. When a business thrives the government will in turn benefit for a fact by having increased revenue not only via direct taxes but also indirectly via spending by traders where they will tax them through VAT etc.