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

Thursday, March 17, 2016

Last November, “60 Minutes”, the flagship news magazine show on US television network CBS, ran a whole segment on M-Pesa, the mobile money service which was started in Kenya nine years ago by Safaricom, the country’s largest mobile phone company. It was a great moment for Kenyan innovation, being featured on prime time television for millions of Americans who were likely hearing about M-Pesa for the first time.

The segment pointed out that years before Google, Apple, PayPal and the rest began experimenting with digital financial services, Kenyans have been using it every day in their millions. Mobile money transactions in Sub-Saharan Africa hit $656 million in 2014, and could more than double to $1.3 billion in the next four years.

The consensus is that mobile money is transforming the way unbanked populations are gaining access to financial services, with Africa leading the charge. But amidst all the excitement, may we in fact be starting to see the limitations of mobile money?

The impact of mobile money, for one, has not been uniform across the continent. M-Pesa has been a resounding success in Kenya, where over half of adult consumers have an account and a huge share of the country’s GDP passes through the system. Yet it was slower to take off in Tanzania, and an outright failure in South Africa.