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

Thursday, February 5, 2015

In the village of Sori along the banks of Kenya’s Lake Victoria, fishing has long been the lynchpin of the local economy. Jobs here are largely divided by gender: men catch the fish, and the women process the meat, take it to market, and handle finances.

As detailed in a 2012 study from the SIT Graduate Institute, residents of Sori traditionally kept their money at home. Theft was a constant concern, and many of the women interviewed reported their husbands misappropriating their savings. For many, traditional banks were either too far away, or demanded minimum deposits the villagers could not afford.

All that changed in 2007 with the introduction of M-PESA, a mobile service that allows Kenyans to store and transfer their money using only a cell phone. Funds can be exchanged over the network using SMS messages, meaning it works on almost any mobile phone. M-PESA agents spread throughout the country allow users to convert their credit to cash and deposit or withdraw from their accounts. The majority of Sori women interviewed for the study now keep their savings in M-PESA accounts, safe from criminals and wasteful purchases.

M-PESA also revolutionized how the women sold their goods. Prior to M-PESA, the women worked only in cash. To sell their fish, the women would have to travel by bus to markets, trips that cost them money and time. Since the adoption of M-PESA, the women send the fish to market by bus and receive payment remotely. “Where it may have taken a woman a week to sell two bags of fish in Nairobi, she now spends one morning buying and sending the fish on a bus to Nairobi for sale by her customers,” reports the study. With their newfound savings, women reported being able to make long-term investments: sending their children to better schools and building themselves more durable homes to withstand seasonal floods.

When we asked Bill Gates to edit The Verge this month, he pointed to digital banking solutions like M-PESA as a technology that will revolutionize the lives of the poor in the near future. “In the next 15 years, digital banking will give the poor more control over their assets and help them transform their lives,” he wrote in his annual letter. “By 2030, 2 billion people who don’t have a bank account today will be storing money and making payments with their phones. And by then, mobile money providers will be offering the full range of financial services, from interest-bearing savings accounts to credit to insurance.”