Seven years ago at the same hotel where I am now staying in Nairobi, Kenya, I asked the porter what he thought of M-PESA – or mobile money.
The porter’s face was animated as he talked my ear off about how he used it. He showed me how M-PESA worked in his phone settings and said he sends money to his mother upcountry. Then he pulled a computer chip out of his wallet to show me his “savings account.” He had been putting money away, not into a bank account, but onto an account associated with his phone number and managed by his telephone service provider.
Since Safaricom introduced M-PESA in Kenya in 2007, it has been a financial revolution.
There is a proverb that necessity is the mother of invention. Back in 2006, Kenya was almost entirely a cash economy. Less than 15% of people had deposit accounts at banks.
Think of that. Almost everyone had to operate entirely in cash. Doing so was expensive – there was corruption, with this and that person taking a piece of transactions. There was loss. People who had formal employment often had to pay for trips to collect their wages in the closest town with a bank branch. For women, there was little opportunity to control money they had earned. And operating in cash was dangerous. I repeatedly heard stories of female traders being assaulted and robbed on their return home from selling goods at the market.
People had no checks, no debit card, no ATM, no bank branch, and no electronic payments of any kind.
But an increasing number of people across the country had simple, old school mobile phones.
Enter Safaricom, DFID, and an amenable Kenyan Central Bank. Safaricom is the Kenyan subsidiary of Vodafone and a major mobile network provider (think Verizon). DFID is the UK government’s international development arm, like our USAID.
Now people nearly everywhere across Kenya can deposit money on their mobile account and access it using a secret PIN number. They use their phone codes to withdraw cash. They use them to send money to a family member across the country. They can use money stored on their phone accounts to pay electronically for things: utilities, school fees, groceries, motorcycle taxi rides, or whatever. Many employers now pay staff salaries on their M-PESA accounts.
All of this is done without banks or ATMs at the user level. Instead, M-PESA operates through existing retailers already doing high turnover business in communities across the country. Safaricom has vetted and registered these retailers as “agents” and authorized them to take cash in and let cash out.
The whole system is designed for relatively small value transactions. Single transaction values are capped at $675, and the total daily value a person can store on the account is approximately $1,000. For perspective, the average annual income per capita in Kenya is roughly $1,400, so those values are a big deal.
Safaricom tracks the M-PESA accounts on a server and holds all of the actual funds in trust in regulated, commercial banks. That means the money is protected in case Safaricom goes bust, and Safaricom cannot use the money for its own purposes. Opening an account and making deposits is free and easy due to the ubiquity of agent locations. Users pay small transactions fees for person to person transfers or to withdraw cash.
M-PESA took off almost immediately. 28 million people in Kenya alone use M-PESA. More than 14 million transactions occur throughM-PESA every day in Kenya. And the idea is spreading. Sixty-one percent of developing countries now have some form of mobile money. Banks are awakening to the opportunity and linking savings and loan products toM-PESA.
It is brilliant. Kenya is the epicenter of this financial revolution.
My vision for Bézi includes profit sharing with the harvesters of our primary ingredients. Practically speaking, profit share distributions in rural areas of Zambia and Zimbabwe are possible because of mobile money. I am not there yet in the evolution of the business, but I can hardly wait to send profit shares directly to the harvesters’ phones!