The Effect of Mobile Money Transfer on Working Capital Management: A Case of Debt Collection at NAWASSCO.

Francis Ng’ang’a Chege, Joshua Matanda Wepukhulu


Adequate working capital is essential for smooth running of an enterprise. The way organizations manage their accounts receivable has significant implications on their financial health. Developments in information technology have permitted alternative functionalities for mobile handsets beyond the original communication function. Mobile money transfer is a key driver in the innovative landscape of management of accounts receivables. Despite the simplicity of this innovation, empirical evidence detailing the impact of MMT on management of accounts receivables and specifically debts is lacking. This is a case study that targeted household clients of NAWASSCO. The study involved analyzing the effect of M-pesa on debtor collection period for a period of four years (July 2007–December 2011) with the following objectives; to determine the debtor collection period for the periods of the study, to ascertain the trend of debtor collection period at NAWASSCO, and to assess the relationship between M-pesa payment ratio and debtor collection period at NAWASSCO. Both descriptive and inferential statistics have been used in data analysis. Under descriptive statistics the means and standard deviation for the period were analyzed. Under inferential statistics correlation analysis was used. The findings of the study were as follows: There was a reduction in Debtor collection period from 53.6 days during pre M-pesa period to 27.7 days during the post M-pesa period. There is an upward trend in the usage of M-pesa in settlement of water bills throughout the study period. The correlation coefficient was (r= 0.008) meaning that there is a random, nonlinear relationship between the two variables .i.e. use of MMT for bill payment and Debt collection at NAWASSCO. Other moderating variables were MMT Regulation by government, Service Providers Efficiency, Accounts payables and inventory as other entities of working capital.

Coefficient of determination (R2) of 0.56 (56%) implied that M-pesa usage for bill payment had 56% influence on reduced debtor collection period at NAWASSCO. The remaining 44% is attributed to other components of working capital i.e. inventory and accounts payable. The coefficient of determination, r2, is useful because it gives the proportion of the variance (fluctuation) of one variable that is predictable from the other variable. M-pesa payment ratio was the independent variable while debtor collection was dependent variable.

Keywords: Mobile Money Transfer (MMT), M-pesa, NAWASSCO, Debt collection

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