Mobile banking allows previously unbanked Kenyans to pay bills, move cash and buy basic everyday items through their mobile phones.
Kenya’s most popular mobile banking platform is Safaricom‘s M-PESA service, launched in March 2007. In January 2010 M-PESA had over 9 million customers and just fewer than 17,000 agent outlets.
M-PESA (‘m’ is for ‘mobile’ and ‘pesa’ is Swahili for ‘money’) is not a standard bank account as such, but more a mobile money transfer service. Customers don’t receive any interest on money held in their mobile bank accounts. The following services are allowed:
- Deposit cash (third party deposits are not allowed)
- Withdraw money from any M-PESA agent outlet or participating ATM network
- Transfer money to any other mobile phone user, even if they are not a Safaricom subscriber
- Buy Safaricom airtime – for self or other Safaricom subscribers
- Pay bills
To load money into an M-PESA account, users need to go to an M-PESA agent and make a cash deposit which results in electronic money being transferred into his or her M-PESA account. The deposit is confirmed by an SMS received by both the agent and the customer. Money can now be transferred to other mobile phone users through an SMS transaction. To withdraw cash from an M-PESA account or for unregistered customers to get cash, the user needs to go to an M-PESA agent and make an electronic transfer to the agent who will exchange this for cash.
“The economic impact of mobile phones is a well talked about fact but the role of mobile phones in remittances and money circulation can be far greater,” writes Mohit Agrawal for Telecom Circle. “Despite the great potential, there are very few examples of successful mobile money transfer due to regulatory hurdles and evolving business models. By far the most successful example of mobile money is M-PESA.”
“M-PESA is the first product in the world that allows the unbanked, with no banking details, no registration, no bank account, no credit card, to do banking,” Safaricom CEO, Michel Joseph, told the Kenya Diaspora Conference in Atlanta last year.
According to TechCentral, the M-PESA service was developed by Vodafone and has also been deployed by Vodacom in Tanzania and by Roshan in Afghanistan (branded M-Paisa). Vodacom has recently indicated it will launch M-PESA in South Africa together with Nedbank.
Of course other mobile operators in Africa have also come to the party with respect to mobile banking. Kuwaiti-based operator, Zain, has recently announced the expansion of Zap, its mobile commerce service to the African nations of Niger, Sierra Leone and in the boundaries of a full commercial pilot in Malawi. The move follows the successful launch of the service in Kenya, Tanzania and Uganda in February 2009 where more than 10 million people have already used the service.
Mobile banking services are used throughout the Kenyan economy. Louise Greenwood writes a Masai farmer told the BBC that when he sells cows in Kenya’s capital, Nairobi, he puts the money on his phone to ensure that robbers can’t steal his money.
“In western Kenya you cannot go to a bar at night if you don’t pay with M-PESA. They will not sell you a beer unless you pay with M-PESA,” says Joseph.
The M-PESA service has become so prominent in Kenya that it is even used as a verb. In the same way that people say “Google it”, people in Kenya say “M-PESA me”.
One of the more innovative uses of M-PESA is where users can send a water pump money via their mobile phones in order to pump water. Safaricom has entered into a partnership with Grundfos LIFELINK, part of the worldwide pump manufacturer Grundfos, that allows rural communities to access safe water and pay for it through the M-PESA money transfer service.
Through using M-PESA’s Pay Bill functionality, money can be transferred from a subscriber’s M-PESA balance to a smart card which can then be used to draw water at subsidised rates from automatic water systems specially developed by Grundfos. The model also includes a local service organisation for regular maintenance of the system and service calls. Courtesy of the Safaricom infrastructure, the unit’s performance is monitored real-time via the internet and failure messages automatically relayed.
The M-PESA service has, however, attracted some criticism. According to Agrawal, “both agents and customers complain of cash float problems, especially in the rural areas. Because the majority of transactions in the village are withdrawals, agents must maintain their cash float. They do this by making frequent trips to the bank. This can be problematic if the agent is not close to an urban centre, where most banks in Kenya are located. This situation is frequent despite great efforts by Safaricom on the store liquidity management.
“The service availability is [also] not uniform across the country. The service availability is dependent on the network availability which is strong[er] in the south-west corner of the country,” he writes.
Joseph believes there is still much more room to roll-out mobile services in Kenya. He says the country’s statistics and gross domestic product (GDP) figures don’t really reflect the true economy. “70% of our economy is informal, it doesn’t figure on the statistics of Kenya. That is why I believe that this country still has huge potential and why we can still grow our mobile penetration to at least 65%,” he argues.