In the fight against petty corruption, a potentially game-changing development is the rise of cashless payments. In a world where people do not use or carry cash, petty bribes to traffic cops or low-level government bureaucrats are either foolish—in that they require a processing mechanism and are therefore easy to detect—or altogether impossible. While some wealthier jurisdictions have made substantial steps towards a cashless economy (see Sweden and Hong Kong), a surprising leader in the rise of cashless payments has been Kenya, reinforcing its role as the Silicon Savannah of Africa and a potential hub for innovation in combatting petty corruption.
In 2007, the Kenyan telecom company Safaricom launched M-PESA, a mobile banking service that allows people to transfer money to other users using their mobile phones, and to withdraw cash from any of over 40,000 agents across the country, creating convenient mobile bank accounts accessible to virtually all Kenyans. M-PESA has been remarkably successful: As of 2015, M-PESA had 20 million subscribers (over two-thirds of Kenya’s adult population), and by some estimates around 25% of the country’s GDP flows through the service. The brilliance of M-PESA is that users do not need to carry around vast sums of cash; instead, they can treat any M-PESA agent as an ATM, and withdraw cash only when needed.
A recent plan has suggested leveraging technology like M-PESA to create cashless payments on the shared buses, known as matatus, that are the main form public transportation in Kenya. Traffic police routinely stop matatus to extort bribes from the drivers and conductors of the vehicles, who often in turn demand cash from passengers in order to continue on their route. In 2014, Kenya’s National Transport and Safety Authority (NTSA) proposed a policy whereby matatus would become cashless, shifting payments to a more easily regulated electronic system. All commuters would have prepaid cards, or funds accessible through their mobile phone that they could use to pay the conductor a flat rate for a given route. Drivers would be discouraged from extorting payments to fund bribes through the online system, as this system would be more stringently regulated and payments would be more easily tracked. Given the ubiquity of M-PESA agents acting as de facto ATMs throughout the country, commuters as well as matatu drivers and conductors would in theory not need to carry cash at all on these routes, thus reducing the incidence of bribes paid to traffic police.
The implementation of this plan, however, has been slow and fraught with difficulties. As of the time of writing, only some matatu associations have begun accepting cashless payments, and cash payments still predominate. In January of 2016, the Chairman of the Matatu Owners Association, Simon Kimutai, stated that full implementation will likely take up to four years, despite the government’s more optimistic timelines. One problem is inter-operability: Ideally, there should be a uniform set of payments on all matatu routes, but this is not yet the case; the unfortunate consequence is that even in matatus with the equipment to receive cashless payments, drivers and conductors still accept cash payments to avoid logistical difficulties. A potentially more serious problem is that some matatu drivers are actively resisting the plan by pretending the card readers are broken or feigning confusion over the new system. One reason for this resistance is the drivers’ desire to preserve their ability to inflate prices at rush hour or in poor weather. But drivers may also resist the cashless system in order to avoid retribution by the criminal gangs that currently patrol certain matatu routes and force drivers to pay bribes for protection. (Similar problems arose in Guatemala, when a similar cashless plan was enacted: When the cashless system limited drivers’ ability to pay these “protection” bribes, gangs reacted with violence, burning buses and threatening drivers and passengers alike.)
These problems mean that in the short term, it is unlikely that this plan to shift to cashless payments will have much effect on the incidence of petty bribes on matatus, as commuters will be forced to carry cash all the same. However, I remain optimistic that this plan nevertheless represents an exciting development, and is one that will ultimately have a meaningful impact. There are three main reasons for my optimism:
- First, the requisite technology and conditions exist for this plan to succeed. According to Pew Research, 82% of Kenyans own mobile phones, and the widespread use of M-PESA indicates that Kenyans are willing to use new technologies to disrupt existing markets. Unlike some other technologies that are only accessible to elites, payments through mobile phones or contactless cards can be made available to Kenyans of all backgrounds and incomes, making the long-term viability of this plan quite plausible.
- Second, the practical obstacles to the plan’s implementation are better viewed as growing pains that can be sensibly and practically overcome. For example, while drivers may pretend that their machines for accepting payments are broken, this could be easily addressed through a hotline through which passengers can report non-compliant drivers. Such a plan has worked in other contexts, including healthcare and education. A Transparency International program in Uganda established a feedback mechanism to handle complaints related to healthcare delivery in a rural area, and conveyed results to local government. The program had positive results—staff absenteeism was found to have been reduced by 30% due to the feedback and follow-up. In the Philippines, the website checkmyschool.org provides a web-based platform allowing citizens to provide feedback through SMS, Facebook, Twitter, e-mail, or the website. A study found that the program was successful in collecting complaints, referring them to local government, and generating real and consistent solutions to the problems raised. Moreover, all participants in the marketplace have an incentive to solve the inter-operability problem. The dominance of M-PESA in Kenya suggests that Safaricom could be well positioned to make the system work, and indeed Safaricom has launched a cashless payment card which can be topped up using M-PESA—the 1963 card—for use on matatus. Though other Kenyan banks and competitors have created other cards, successful inter-operability will benefit all participants in ensuring a cohesive and well-functioning market. In a fractured market lacking true inter-operability, customers will not have access to the full range of matatus, or else will likely resort back to cash payments, and Safaricom and the other operators of the payment cards will lose out on a potentially lucrative market.
- Third, this plan should eventually garner strong public support. Traffic police are a notorious source of petty corruption, and the fact that they make contact with Kenyans of all socioeconomic backgrounds on a routine basis makes it understandable that Kenyans view the police as the most corrupt institution in their country. In that this plan could go a great way to reducing the incidence of petty bribes paid to these police officers, I am optimistic that public support will force its full implementation.
Despite its slow implementation, this system represents a creative solution at tackling a petty, but insidious form of corruption, and hopefully in due course cashless payments will serve as a meaningful check against police corruption.
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It’s good to hear an update that the program is ongoing. I was under the impression that it has been stagnant due to the large resentment from the bus drivers. I remember the NYtimes video and article from 2014 that highlighted the issue. I also recall that Google was one of the first to introduce and pull the plugs on the first contact cards: BebaPay. I would like to offer three observations:
1. Cashless systems do not provide the liquidity that many small businesses like matatus need. If the bus breaks down, for example, the driver and the conductor need a chunk of cash that they can dispense at short notice. While the mechanic shop may have m-Pesa, the matatu m-Pesa account may not have sufficient cash as these business operate within tight cash flow margins. Liquidity offers them the flexibility.
2. M-pesa, while ubiquitous, provides an inferior payment mechanism than the contact cards. The payment process of contact cards is quick and easy. M-Pesa, on the other hand, requires several clicks on the phone that may take up to 30 seconds, which is rather cumbersome when passengers get on and off matatus at a frenzied pace.
3. I am of the opinion that technology alone cannot solve societal issues like corruption. For example, police may still extort drivers by asking for their personal cash, not just the customer cash. I am curious to know whether GoK has implemented new regulation or policies in regards to curbing petty police bribes. In some other countries governments acquiesce police roadblocks as they are unable to provide salary increases, thus allowing for the motorists to pay for what should be the police’s salary increment. Thus, I wonder how serious GoK is in curbing these police bribes, which are petty in contrast to the level of corruption that it is famous for.