Enabling the exchange of money for information, goods, or services

Summary of Findings:

Off-Platform Transactions:

  1. Limited functionality of social media platforms forces micro-entrepreneurs to explore cumbersome methods of receiving payment.
  2. The lack of an online payment mechanism on some e-commerce platforms pushes transactions offline.
  3. Some micro-entrepreneurs use off-platform digital credit to meet their businesses’ needs.

On-Platforms Transactions:

  1. Some e-commerce platforms provide an end-to-end service from promotion to payments.
  2. Online work platforms pay freelancers through a variety of online payment methods, including M-PESA.

What’s a transaction? A customer finds a good or service they want to buy. A seller is eager to provide the good or service that the customer desires. Customer and seller discuss terms, and, if the terms are appropriate, the customer and seller exchange money for the good or service. This structure is fundamentally the same across geography and demographics, as customers continue to search, negotiate, and transact for goods and services.

What differs, however, is how money is exchanged. In Kenya we observed the use of cash, M-PESA, buying on credit, and bank account transfers as mechanisms through which micro-entrepreneurs receive payments.


The tangibility of cash is often a driver to use physical money, as explained by Wawira a micro-entrepreneur who works at a veterinary shop:

“I don’t know if this is an African thing but basically I love to touch money.”

And as Benard, a shoe merchant reiterated:

“The real thing is that we love cash transactions.”

Zawadi, a baker, prefers to use cash due to convenience and cost:

“Maybe people just don’t like the process of going to your phone to start paying for something…and sometimes you know when you want to pay with M-PESA…there is a charge.”

While Nakesa, who runs a small construction business highlighted similar concerns about the cost of M-PESA. She weighed this against the benefits it brings in terms of financial management:

“…but I like it because it gives me a track of my finances.”


With M-PESA as prevalent as it is in Kenya, many micro-entrepreneurs like to transact using this medium of exchange (often in tandem with cash), leveraging its convenience, security, and incentives to save. As Rehema, a caterer in Kibera, told us:

“M-PESA is safe because no-one has your M-PESA PIN. No one can steal it, even if your phone gets lost your M-PESA will be safe.”

Chepkirui, a hairdresser, explained that she prefered her customers pay her through M-PESA rather than cash because it reduces temptations to spend:

“When I get paid through M-PESA, it is very hard for me to misuse the money.”

And Kerubo highlighted the convenience of M-PESA for her jewellery business, telling us she prefers it to cash because:

“It’s on my phone…it’s so easy, there is no movement.”

Paying on Credit

In other instances, and as a way to compete against other nearby businesses, some micro-entrepreneurs extend a line of credit to their customers. This is often not the preferred method of transacting, but fierce competition sometimes forces micro-entrepreneurs to explore alternative modes of attracting customers.

Bank Account Transfers

It was also interesting to hear that a number of micro-entrepreneurs have a bank account for saving money and/or as a requisite for receiving payments through some platforms (more on this below!). Otieno, a shoe merchant, told us he likes to transfer profits from M-PESA directly into his bank account on a daily basis, leaving some float in his M-PESA account for the next day’s expenses.

However, beyond preferences, platforms influence the scope of these exchanges in platformized markets. This section, one of four detailing “platform practices”, describes how the 27 micro-entrepreneurs we interviewed have adjusted their transaction behaviors in response to what the platforms do (and do not) offer in terms of transaction support.

Off-Platform Transactions

1. Limited functionality of social media platforms forces micro-entrepreneurs to explore cumbersome methods of receiving payments for goods and services.

Micro-entrepreneurs in Kenya often use social media platforms to promote their goods and services, from computer accessories to cupcakes, and from professional product reviews to article writing. If a customer is interested in the good or service, they often respond to the post publicly before migrating to a one-on-one conversation on a social media platform (generally WhatsApp).  They then tend to leave the platform and negotiate final terms through a phone conversation or in-person meeting, and ultimately exchange money off the platform. The method of payment is often determined by preference or geography. Kioko, a small trader of flash disks, is paid cash-on-delivery for items he delivers in person and through M-PESA for goods he sends via post or friends. This use of multiple online applications and offline tools is cumbersome and time intensive.

Offline, unprotected transaction exchanges are also more risky. In response, some micro-entrepreneurs find ways to formalize this offline payment process. Faith, a fresh-juice seller who uses WhatsApp to communicate with clients, requests an email from customers to confirm large orders so that there is is a reliable record that an order has been placed and payment made.

“If it’s something like a party, and it’s a lot of money, you have to write me an email as proof so that we can just trust each other…I prefer an email because in WhatsApp I could just delete it by mistake, but in email I’m not likely to delete it.”

Generally, the savvier social media sellers ask for a deposit before sending a good or service. The amount of the deposit varies, but the experienced seller generally asks for enough money to recoup the cost of the good in the event that the customer fails to pay the full balance (or pay at all). Nduku, a micro-entrepreneur who has a small clothes shop, often uses WhatsApp to promote new stock with existing clients. If a customer expresses interest in buying an item of clothing, she requests a deposit via M-PESA before sending the item:

“Before that thing is delivered you pay 50%, because there is also transport, so that I don’t lose out.”

The lack of transactions facilitation across social media platforms, from Facebook to WhatsApp, forces micro-entrepreneurs to transact offline and often in-person, adding a time-intensive and inefficient layer to the sales process.

2. The lack of an online payment mechanism on some e-commerce platforms pushes transactions offline.

While some Kenyan e-commerce platforms, such as Jumia, provide an end-to-end service for their merchants (more on this below), others fall short, forcing buyers and sellers to transact offline. OLX (a C2C eBay model) is a good example. While OLX brings buyers and sellers together enabling broader discovery and efficient matching of supply and demand and provides nudges of advice to help merchants make the most of the platform on offer, their service more or less stops there. Any type of interaction between buyer and seller, be it communication or monetary exchanges, happens independent of the platform. As a result, payments have to be organized off the platform, usually through cash or M-PESA.

3. Some micro-entrepreneurs use off-platform digital credit services to meet their businesses’ needs.

We spoke to a number of micro-entrepreneurs who were either accessing digital credit offerings, or were interesting in doing so. All of these digital credit offerings were accessed through apps, independent of platforms. Chepkirui, a hairdresser, prefers to access credit through Tala and Branch rather than M-PESA’s M-Shwari due to the speed at which credit limits grow on Tala and Branch. Of the two, she prefers Tala, again due to the superior speed at which her credit limit grows:

“I think Branch take their time to add money as compared to Tala. Tala each time you pay back the loan you get a KES 1000 (~$10) more if you want to loan again. So I can take a loan today maybe KES 1000 (~$10), pay it back tomorrow and next week if I want to take the money again they can give me KES 2000 (~$20).”

Odeke, a bottled water distributor also uses Tala loans to buy new stock. He likes the instantaneous nature of the digital credit offering, which gives him immediate and emergency loans. Like Chepkirui he uses both the Tala and Branch apps.

While these insights aren’t specifically related to platform practices, the off-platform financial behavior of micro-entrepreneurs should be of interest for platform players designing for this segment.

On-Platform Transactions:

4. Some e-commerce platforms provide an end-to-end service from promotion to payments.

Jumia, (a B2C site similar to Amazon), differs from OLX in terms of the level of control it exerts over the relationship between buyer and seller. Jumia acts as a middleman and trusted intermediary intermediating interactions and transactions between buyers and sellers. When it comes to payments, Jumia’s escrow account builds trust between both parties and negates the need for merchants to request deposits for goods, as we observed with transactions made after social media interactions between buyers and sellers. In brick and mortar businesses, customers can see the good or service and use their intuition and judgement to determine if it’s worth the price. But when doing business over platforms, it’s significantly more difficult to assess the quality of the good or service and determine if the seller is trustworthy. The escrow account offered by Jumia mitigates some of these concerns.

In terms of payments, Jumia merchants are paid via bank transfer or check, either on a weekly or monthly basis.

5. Online work platforms pay freelancers through a variety of online payment methods, including M-PESA.

As discussed in our Digital Side Hustle section, we encountered a number of micro-entrepreneurs who were leveraging online work platforms, Upwork, Freelancer, Uvocorp, iWriter, and Studybay to sell their freelance writing services, from product reviews to academic writing. These platforms provide a purely online service to their freelancers, and, as such, payments are also managed digitally on the platform.

For an online work platform such as iWriter, freelance writers create an account, build a profile [explored further in the credibility section], and explore freelance assignments as posted by individuals or businesses. Some of these websites function like an auction in which the writer reviews the instructions for the assignment and places a bid on how much they’ll charge for the assignment. At the discretion of the client, the writer with the most appropriate profile and the most cost effective bid wins the work. Once the job is complete, the client sends the bid amount plus the website fee via an escrow service that is released either through a bank transfer or third-party such as PayPal.

Upwork enables freelancers to transfer earned money directly to their bank accounts, as well as through third-party payment vendors such as PayPal and M-PESA (only in Kenya). Withdrawing funds, however, is not necessarily instantaneous. It depends on the type of contract with hourly contracts usually based on a weekly billing cycle and fixed-priced contracts based on milestones.

Under this scenario, the platform operates as the trusted intermediary between parties that ensures the transaction—money for a written assignment in this case—is completed by both sides. As Mary described it:

“…now when you use a site like Freelancer, the client is regulated by that company, so… before you start writing that assignment, the client has already paid, and basically, the money is being held by the site, so once you finish, they now give you the money.”

With online work platforms, there is an implicit trust when using these dedicated services as opposed to those that are retrofitted for purpose.

But outsourced work is paid off the platform

Outsourced work advertised on a Facebook group dedicated to Kenyan online writers

However, not all micro-entrepreneurs can access online work platforms and benefit from the integrated services on offer. As discussed in our Digital Side Hustle essay, due to various gatekeeping issues, some micro-entrepreneurs are locked out of online work platforms and look for outsourced work. Outsourced work is either found through friends, family, or dedicated social media groups (see image). When work is taken off the platform, so are interactions and exchanges. Accordingly, the trust that digital escrow accounts provide to these freelancers erodes.

A number of the micro-entrepreneurs we spoke with highlighted the risk of accepting outsourced work through Facebook groups dedicated to online writing due to the high probability of being conned into completing services without being paid. Mary told us, based on her experience in Kenya, that:

“there are many people who have not paid their (outsourced) writers.”

Concluding thoughts

Among the platforms we observed micro-entrepreneurs using in Kenya, there was a clear distinction between platforms that mediate business transactions (Jumia, online work), and those that don’t (social media, OLX). While transactions mediated by platforms engender trust through escrow accounts, we must be careful of labelling one as good and the other not. Online payment mechanisms bring benefits, but access and gatekeeping issues prevent some micro-entrepreneurs from using these online payment tools.

Read next: Credibility