Effects of Cost Reduction by Use of Mobile Phone Money Transfer System on the Profitability of Micro and Small Enterprises in Bungoma County.

There have been relatively few studies focusing directly on the way mobile payments are used to enhance the quality of the services of MSEs especially those in rural areas and therefore increasing their profitability. The main purpose of this study was to determine the effects of mobile phone-money transfer services (M-PESA) on the profitability of Micro and Small Enterprises in Bungoma South District. The target population was MSEs in Bungoma South District which consisted businesses such as retail shops, tailoring, chemists, hardware’s, carpentry, metal workers, hair salons, repair services and butcheries. Some of the major findings included that almost each business own or have used a mobile phone in their business at 98%, education level and duration of running the business has an effect on the profitability of that business. Most MSEs also felt that mobile money transfer services have helped to increase sales revenue as mobile phones are mostly used by businessmen to communicate with customers and suppliers and also has helped the business to grow and as a result increased the productivity and profitability of the business. More effort should be made to educate the public especially the MSEs on business benefits of these new technologies. Internet enabled mobile phones are already on the Kenyan market and most MSEs in rural areas do not use these service therefore training is required to enlighten rural people as the internet is important for the import or export of goods, and MSEs that would like to participate in global markets should be given a chance to make informed market choices by being enlightened on internet-based mobile phones. Key Words: cost reduction, mobile phone, money transfer system, profitability, Micro and Small Enterprise