At Baird’s CMC, we have been closely following the progress of M-Pesa in Kenya – the mobile phone based payment and money transfer service we predicted would be game-changing when it was first launched in 2007. With 17 million users in Kenya (more than two-thirds of the country’s adult population) and 25 percent of the gross national product flowing through it, M-Pesa has become integral to the economic life of the country.
In our previous posts, we outlined some of the factors that led to this success and how the service is changing citizens’ lives for the better. Furthermore, M-Pesa has also galvanized businesses and boosted the country’s economy.
Lowering the cost of money transfers has helped to increase market activity, especially in rural areas. Take, for example, business owners in villages who no longer have to spend 2-3 days travelling to and from Nairobi to provide funds for their suppliers. Instead, the suppliers draw on the funds via M-Pesa. More cash and (consequently) larger inventories also provide a much-needed stimulus to the economic activity in village markets. Apart from the time savings, the service offers the added advantage of security, enabling traders and business owners to engage in larger transactions without risk. M-Pesa also presents a strong foundation on the basis of which a number of start-ups have come to life and flourished.
The popularity of the service has also not gone unnoticed by African banks, which previously ignored the mass market in the country. Numerous new bank branches have been opened across Kenya since M-Pesa was launched in 2007, and various ventures are using mobile money as a means to facilitate analytics, insurance, credit and e-commerce. An electronic financial footprint provides companies a wealth of data that helps them better understand consumer purchasing habits.
Mobile phone based financial services are forecasted to generate USD 19 billion annual revenues within the next decade. Both African entrepreneurs and multinationals are starting to focus on the opportunities in this area. With new companies and innovative applications set to enter the market, the next few years will certainly witness exciting developments in Kenya.
In our next post, we assess what Kenya’s M-Pesa story offers in terms of inspiration and learnings to other countries around the globe.