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 the most successful mobile phone based financial service in the developing world.
Why did M-Pesa meet with such resounding success in Kenya while similar mobile-money systems in other countries failed to create more than a ripple? A number of factors contributed to this. As of 2011, more than 75 percent of the country’s population did not have a bank account. Moreover, banks are not always perceived as safe by Kenyans, owing largely to the ethnic entanglements some banks got involved in during the post-election violence of 2008. In addition, unlike the proliferation of ATMs in the developed world, Kenya – like many other nations in the global South – has relatively few ATMs: one for every 18,000 people. It is also exorbitant to transfer money using other methods. By contrast, M-Pesa is easily accessible, convenient, safe and affordable. Safaricom’s strategic and consistent marketing campaign communicated these advantages clearly to people across the country.
In 2007, Kenya was ripe for such a service. As the economy expanded and urbanization increased, more and more urban workers needed to send money back home to their families in villages. However, money transfer methods hadn’t caught up with this reality. Bundles of cash were still making their way across the country in the hands of trusted friends or hidden in secret crevices of buses and trucks. As one recent article puts it, with the launch of the service people’s money “moved from mattresses to mobile accounts virtually overnight.” For the millions of workers with no access to formal money transfer and other cash management services, M-Pesa has been a boon.
In our next post, we examine how this service has changed the lives of Kenya’s people.