NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, June 24, 2014

Bitcoin has all the buzz right now. But there’s another financial innovation that could have a far more meaningful impact on the lives of billion of people without bank accounts across the world.

In 2007, two years before the mysterious Satoshi Nakamoto wrote the original proposal for Bitcoin, Safaricom, a Kenyan telecommunications company effectively controlled by Vodafone, launched M-Pesa, a service that let anyone with an active cell-phone line send and receive money instantly.

Coin Of The Unbanked Realm

“Pesa” means money in Swahili, and M-Pesa, short for mobile money, has become synonymous with money in Kenya. M-Pesa transactions accounts for 40 percent of the gross domestic product. It has spread beyond Kenya’s borders to South Africa, Afghanistan, India, and most recently Romania. It doesn’t require smartphones; it works on the very basic so-called “feature” phones that are common in the developing world. If you can send a text message, you can bank with M-Pesa.

M-Pesa has enabled millions of the unbanked to emerge from subsistence living into the makings of a middle-class life. Being able to get paid dependably and store up assets is something we take for granted in the West, where parents often open up savings accounts for their kids as an introduction to the modern financial system.