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 an integral part of citizens’ daily lives.
In our previous post, we outlined some of the factors that led to M-Pesa’s success; now, let us take a look at the different ways in which this service has altered the lives of millions across Kenya for the better.
Millions of Kenyans are not part of the formal banking system and, for them, M-Pesa offers an accessible and dependable means of transferring money. This is especially important for urban workers who need to regularly send money home to their families in remote rural areas. The sheer convenience of the service (not having to waste time and money in order to transfer cash) itself creates a perceptible difference in finances. One study found a growth of 5-30 percent in the income of households that adopted M-Pesa!
Moreover, M-Pesa enables the poor, informal-sector worker to save, to actually build assets – a previously unimaginable feat. More than 40,000 agents function like tellers for vast virtual banking system. These small savings are often key to catapulting a family out of poverty or keep them from sinking under during an emergency situation.
Apart from person-to-person transactions and savings, M-Pesa also makes it possible for customers to make a range of payments to businesses, including water and electricity bills. Along with utility bills, Kenyans are starting to make other kinds of payments, such as school fees. As early as 2010, a World Bank report recognised this facility as a key factor in improving people’s lives, specifically highlighting Bridge International Academy which provides a low-cost alternative to public schools in some of the most impoverished areas of the country. The company is an M-Pesa “super-user” – it accepts and makes payments through the service. This is a huge advantage for the parents of students, who do not have to be physically present to make tuition payments. It also means that there is no security threat to employees after being paid, especially considering the locations of the schools.
M-Pesa is proving transformative in a myriad of ways, helping to create financial stability and security amongst millions of Kenyan households. In our next post, we look at how the service is also boosting business in the country.x