e-money in Kenya: the story of M-pesa

[Meddie Mayanja]

Much has been said about the potential impact of cell phones to development. With high access - nearly total in urban and peri-urban areas around the world, what is left is useful content and good implementation plan.

Kenya has been experimenting with e-money (a.k.a "M-pesa"). For more than a year now, With this service, Kenyans can open up a digital account on the cell phone, send and receive money, pay bills like electricity and obtain credit. Users can also withdraw money from ATMs (see photos). The service uses Safaricom - a mobile telcom company in Kenya.

I wanted to put this whole service to test. Asked this taxi driver, Adrian who dropped me off in Nairobi. To him I asked, do you know m-pesa? He shot back immediately, "...you mean sending money on my phone? almost everyone knows that? what do you want?" there was no doubt at that point that this was a real service with a cutting edge. I engaged my taxi drive on a number of aspects. Adrian said the name m-pesa was perfect - easy to remember and attribute to the value of the service: "pesa" means money in swahili. Simply, this is mobile money.

He told me how he had recently sent money to his brother in Kisumu (one of the popular towns in Kenya and several kilometres from Nairobi). He simply sent an SMS to the brother's phone with amount of money and centre number. The system withdrew money from his account automatically to credit his brothers account and sent a confirmation within seconds. Adrian had once gotten a loan from the m-pesa point officer. "...as a taxi driver, I know I will make some money each day but not sure when and how much. When my wife needed money urgently, I called the m-pesa point officer in my township to loan me some money, put it on my m-pesa account". It is informal banking at best. Helping people to establish trust and exchange money.

If you want to credit your account, Walk into any m-pesa point hand in the cash, you would receive an SMS to confirm credit status immediately - start to spend. Did I say that there are costs to using m-pesa, yes there is. It is however considerably cheaper than traditional banking.

One small scale businessman told me it was a great service that he has used to pay his landlord at times. He however fears that it gives people too much access (24/7) to their cash which could undermine saving culture. Word is going around that it will be available across East Africa - Tanzania, Uganda, Rwanda and Burundi as well as Kenya. South Africa has a similar service called WIZZIT - more about this later.