Usually, the only news about Kenya that the editors of The Economist deem fit to print is the dark and depressing type: stories of grand corruption, poverty and poor governance.
So it was refreshing, if not startling, to see a recent editorial in The Economist describing Kenya as “a success story” in the use and application of mobile phone banking. The editorial states: “By far the most successful example of mobile money is M-Pesa, launched in 2007 by Safaricom of Kenya. It now has nearly 7 million users — not bad for a country of 38 million people, 18.3 million of who have mobile phones.”
Described as “Kenya’s Debit Card”, this uniquely Kenyan innovation is now being replicated in other countries, including Afghanistan. This Kenyan success story, says Ken Banks, founder of kiwanja.net, represents both “a revolution and a revelation.” Figures released by Safaricom in March this year show that an astounding 550 million Kenya shillings, or roughly US$7 million, is transferred daily using M-Pesa.
Although each transaction has an average value of 2,500 shillings, it all adds up in unexpected ways. The editorial in The Economist cites a study that shows that the income of Kenyan households using M-Pesa have increased by between 5 and 30 per cent since they started using mobile banking.
A detailed report in the same edition cites a study by a researcher at the London School of Economics who found that an extra 10 mobile phones per 100 people in a typical developing country added 0.6 percentage points of growth in gross domestic product (GDP) per person.
Mobile phone banking in Kenya has shown that when the formal sector fails the poor and the marginalised, technology and innovation can come to the rescue in amazingly successful ways. “People in developing countries are rarely simple, passive recipients of technology and rarely wait for outsiders to provide solutions to their problems,” writes Banks.
In Africa, bad roads, poor communication infrastructure, lack of electricity, rigid rules for formal banking and endemic poverty may have hampered economic growth and development, but mobile phones have provided solutions where none existed previously.
In Uganda, mobile phones hooked up to spare batteries are attached to bicycles (affectionately known as “Bodaphones”) which transport passengers to where the business is. The mobile phone business has also dramatically increased employment in the informal sector.