July 6, 2012
The Invisible Bank: How Kenya Has Beaten the World in Mobile Money
A beginner’s guide to m-Pesa and an examine its implications for financial access in developing economies. By Ken Banks for National Geographic.
New innovations are challenging the idea that development requires handing ideas down from developed to developing. In banking and finance, the big ideas in cashless transfers and mobile, flexible exchanges are not to be found in Geneva or London or New York. A revolution in mobile money transfer has occurred, but not in these financial centres. Instead, it’s happened in Kenya, with m-Pesa.
The service was developed between Safaricom and Vodafone, and launched in 2007. And it’s not just something used in cities or by big commercial interests. By 2010, over 50% of Kenya’s population had used it – this means rural villagers haggling over produce, then using their Nokias to make the final deal. It means Masai herdsmen bringing their phones to market along with their cattle, ready to stock up on essentials to bring back to their homes.
... For people who live in isolated areas, the service means no longer having to carry lots of cash to markets or towns, risking losing huge amounts to banditry and theft. For people without permanent addresses or bank accounts, the service means they can pay what cash they have to m-Pesa in exchange for mobile credit, making payments and transfers and building up savings – becoming participants in an economy from which they had previously been locked out. For migrants, the service allows them to send money home to their families and villages safely and simply.
So how does it work? m-Pesa relies on a network of small shop-front retailers, who register to be m-Pesa agents. Customers come to these retailers and pay them cash in exchange for loading virtual credit onto their phone, known as e-float. E-float can be swapped and transferred between mobile users with a simple text message and a system of codes. The recipient of e-float takes her mobile phone into her nearest retailer when she wants to cash in, and swaps her text message code back for physical money. There are already more m-Pesa agents in Kenya than there are bank branches.
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