New IMF instant GDP shows Kenya mobile money going ‘kadogo’

Written by Otiato Guguyu

Kenyan economy shrank on smaller mobile money transactions a practice popularly known as kadogo economy as consumers responded to inflation by shrinking their basket sizes.

The rising costs of goods last year forced Kenyans to cut their spending as the value of mobile money plunged as much as 20 percent in February despite growth in the number of transactions.

According to the International Monetary Fund (IMF), the value of mobile money transactions (Total agent cash in cash out) had almost doubled over the last five years until end-2024, before softening in the first half of 2025.

While the number of transactions edged higher 60 percent to 214.51 millions, the value of mobile money transactions dropped by 21.8 percent y-o-y to Kes636.21 billion in February 2025 and Kes713.25 billion in May 2025—still 1.2 percent lower than the same month in the previous year.

The last time Kenya witnessed a dramatic shrinking of mobile money was back in 2020 during the onset of the Covid 19 pandemic with transactions hitting multi-year lows. However, the recovery was swift and exceeded pre-pandemic levels, jumping by 84 percent from its trough in April 2020 to February 2021, driven by Central Bank measures—fee waivers, higher limits, and promotion of digital payments—alongside shifts to contactless transactions.

Since then, growth accelerated through expansion of services into credit, savings, and bill payments, plus increasing e-commerce and remote work.

“The apparent divergence between mobile payment usage and transaction value in the first half of 2025 suggests a potential shift toward low-value payments and a retreat in large-scale use, reflecting higher living costs and slowing household spending,” IMF said in the paper Nowcasting GDP Growth for Kenya.

The strong uptake of digital payment systems has enabled over 85 percent of Kenyan adults to access financial services mainly through digital platforms in 2025 making it a great candidate for the IMF project.

The IMF, in a new paper that models the use of mobile money to predict Kenya’s GDP almost instantly, shows that inflationary pressure dampened growth, predicting GDP for quarter four of 2025 at around 4.8 percent.

If Kenya adopts it, it will be the first developing country to estimate GDP projections on a month on month basis, allowing policymakers and investors real-time data to make decisions.

While Kenya stands out among LICs for the relatively high quality of its macroeconomic statistics, GDP figures were previously published only annually until 2009, when quarterly national accounts became available and the PMI business sentiment survey began in 2014.

Kenya still lacks timely and sufficient data points and the IMF team only found 11 monthly economic series that are publicly available for Kenya, compared to the 190,000 monthly US economic series that are publicly accessible from the St. Louis Federal Reserve database.

The new IMF model is the first time policymakers have made an attempt to use digital payments data to nowcast GDP growth in Kenya.

Digital money data is a timely indicator of the Kenyan economy’s performance, with data published on the 17th of each month for the preceding month.

Kenya also has a wealth of data given the number of active mobile money agents and registered mobile money accounts nearly doubled over the past 5 years, reaching 424,404 and 85.62 millions in May 2025, respectively.

IMF officials reckon that with this data as well as real sector official agricultural variables on trade in goods in tea and coffee and services (tourists arrivals), production of vehicles and, electricity generated can offer accurate timely GDP estimates.

They also added data on remittances which shape household disposable income for consumption and investment alongside money supply (M2) to reflect the amount of liquidity available to support economic growth, as higher money supply without a corresponding increase in the production of goods and services can lead to inflation.

Soft data on purchasing managers’ sentiments (PMI) helped them capture the economic momentum in manufacturing and services perceived by supply chain professionals.l embassies into proactive originators and facilitators of commercially viable deals.

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