M-PESA

M-PESA is one of Kenya's great success stories in the microfinance world, and one reason I've been really excited about getting the chance to travel here. It is a service that allows people to send and receive money to others via text (SMS) messages with their mobile phones ('pesa' is the Swahili word for 'money'). At least as important, it also allows people to save money in their M-PESA accounts, turning the ubiquitous M-PESA agents--corner stores, mobile phone outlets, etc.--into bank branches. In a world where there are five billion mobile phone accounts and about three billion people lacking access to basic financial services (like saving and borrowing), the simplicity of this innovation is beautiful.

*Recently, I came across the more relevant intersection statistic: the number of unbanked with access to mobile phones. I forget the exact number, but it was still substantial, if much less punchy.

** UPDATE: Here is one estimate, courtesy of BCG: perhaps 2 billion unbanked adults with access to mobile phones.

*** And another estimate, courtesy of Economy Times, together with the GSMA and CGAP: "about one billion people in emerging markets have a mobile phone but no access to banking services; by 2012 this population will reach 1.7 billion"
http://economytimesgh.com/insuranceIND_2.php?recordID=107

Alex, our driver while in Nairobi who lives in the Kibera slum, explained M-PESA to me better than any of the articles I've read. He was generous enough to walk me through his recent transactions.

M-PESA on Alex's mobile phone

Essentially, once he signs up with his national ID card, he gets a PIN, account number and password. With his account number, anyone else with a mobile money account can send him cash. (Safaricom's M-PESA is the most common, but Airtel, Yu and Orange all have their own mobile money platforms.) The sender deposits Ksh 555 into their M-PESA account by visiting an agent location and handing over cash to the agent. M-PESA deducts Ksh 25 as a fee, leaving the sender with Ksh 530 in their account. Then they simply send a text to M-PESA saying "Give Ksh 530 to Account X."

Alex sending money through M-PESA

The transaction happens as quickly as it takes to send a text message (and thankfully, they don't have AT&T here).

Confirmation of money sent by Alex

When Alex wants to withdraw his money, M-PESA deducts Ksh 30, leaving him with Ksh 500. For me, one sign of how imbedded this system is is that senders and receivers memorize the transaction fees and readily factor them in when transferring money.

While the upper and upper-middle classes still favor credit cards, mobile money has clearly taken off here. While Alex had a savings account before M-PESA, Fauz (our guide in Mombasa's Old City) said he uses M-PESA to save the tips he earns from tourists like us. Today, in fact, M-PESA came to our rescue when Moses needed Ksh 20,000 to replace the van's gearbox.

Along our drive, there were about as many M-PESA agents and places to top up mobile minutes as there were places to buy a Coke--which is to say, quite a few. The most common sign post on the main road is the one advertising the direction of the m-PESA agent. Most of the villages we passed had multiple M-PESA outlets, while a slightly larger town had more than a dozen M-PESA outlets (and multiple microfinance and traditional bank branches). In Nairobi or Mombasa, you could hardly go a few blocks in any commercial area without seeing M-PESA and other mobile money agents.

In Kenya, mobile money took off without the blessing or assistance of traditional banks. Those banks are now playing catch-up by partnering with the mobile networks. Unsurprisingly, in other countries like Nigeria, banks and their politically-connected special interest groups are resisting the entry of mobile networks into the financial services space. Afghanistan, however, has its own version of this service, called M-Paisa (named after the Afghani word for 'money'). I'm hopeful that any resistance will lack staying power, because what I saw on Alex's black & white Nokia looked like the future.