Viewpoint: Much Hangs on Mobile Money in East Africa
From his shack in Kangemi, a slum at the western edge of Nairobi, Gilbert Onduko sells bare essentials to his neighbours. A blackboard above the hatch lists prices for ugali(maize cooked into a sort of porridge), farina (similar to semolina) and cooking oil. On the roof of the shack is a small solar panel, about the size of a tea tray, which powers two lights inside and a mobile phone. Since he got it, about a month before your correspondent visited, Mr Onduko has been able to keep his shop open until midnight rather than just in the daytime. He has also cut down his kerosene bill by 100 shillings (about $1) a day—a hefty saving in a Nairobi slum. “And now my phone is always charged,” he grins.
Mr Onduko’s story shows how electricity can improve Africans’ lives. But it also shows what access to credit can do. It was not technology that was stopping shopkeepers in Nairobi’s slums from having electricity. Indeed, power lines run within sight of Mr Onduko’s shop. The problem has been that connecting to the grid, and paying the bills, is beyond the means of most slum-dwellers. To get his solar panel, all Mr Onduko needed was a mobile phone and a deposit of about 3,500 shillings. The rest he can pay for on tick. Each day he sends 50 shillings via his mobile to M-Kopa, the firm that provides the solar panels. That keeps the machinery going, and within about a year he will own it. M-Kopa, which means “to borrow” in Swahili, has made its name selling solar panels, but it is rapidly becoming one of east Africa’s most innovative financial companies.
Mobile and internet technology is transforming industries across the world, but Africa has more potential than most because the existing infrastructure falls so far short of people’s needs. Executives talk exuberantly about how the continent is “leapfrogging” the West through technology. A lot of this is wishful thinking. Drones, for instance, seem unlikely to become a substitute for roads. But the revolution in finance is real. According to the World Bank, between 2011 and 2014 the proportion of adults in sub-Saharan Africa who have a mobile-money account increased from 24% to 34%.
East Africa is one of the most developed markets. Some 58% of Kenyans use mobile-money services, overwhelmingly M-Pesa. And as M-Kopa shows, such mobile services offer more than just a means to transfer money. Mobile phones can provide an address book, a credit rating and a distribution network all in one. Together, those things can allow even very poor people to acquire assets with their earnings, setting them on the path to becoming middle-class.