M-Pesa Mobile Money

Microfinance Focus, September 19, 2011: In Kenya, M-Pesa, a mobile banking service, has reached 10 million people in the country. Even though only 4 million Kenyans have bank accounts. Customers can use M-Pesa to deposit cash, withdraw money and transfer money electronically using their mobile phones. M-Pesa is a gateway to financial inclusion in Kenya. A short film from CGAP shows how mobile money is changing the face of banking in Kenya.

Customers transfer money electronically using their mobile phone and the agent converts it to Kenyan Shilling. Safaricom, a Vodafone affiliate, launched M-Pesa just three years ago and already half the adult population is using it to manage money and to send money to the countryside. M-Pesa customers say they value the service because it is cheap, convenient and safe.

M-Pesa makes handling finances for small businesses easy. Patrick, a building contractor, says when he is away and the workers need to purchase material, he just has to send money and they can withdraw it wherever they are and work is done. Mary, a stall owner in Toi Market Kibera, uses it to buy maize from the garden for her business. Before M-Pesa small merchants like Mary sent money using informal means that were not licensed to transfer money. This was risky. Also the cost and inconvenience of travelling to the city center meant that Mary, and others, were effectively excluded from the banking services. But today mobile money is bringing banking to Kibera.

M-Pesa is accessible to its customers, as shops can be found easily nearby. Green M-Pesa shops are popping up everywhere in Kibera. “Anytime you like to use it. Everywhere you go, you will find M-Pesa”, says Michael a Matatu driver.

Today M-Pesa is mostly used to remit money home from the city to the countryside and making payments. However, the initial concept of M-Pesa was to allow microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers. This was intended to make microfinance more efficient and competitive, by reducing the cost of dealing with cash. However, complication arose with partner microfinance institution (MFI) Faulu, when customers started using M-Pesa for other alternative uses.

Other than Kenya, M-Pesa has been recently launched in Tanzania. It has also entered the Afghanistan and South Africa market. It has future plans to expand to India and Egypt and well as venture into international money transfer service in Kenya.