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

Thursday, December 18, 2014

When mobile network operator (MNO) Safaricom launched its M-Pesa mobile payments system in Kenya seven years ago, few business models were as ripe to explode. With extremely high mobile penetration rates, a high proportion of unbanked households, a regulatory system that allowed telecoms companies rather than banks to lead the way, and a migrant population suffering from expensive domestic remittances, it is little wonder that more than two-thirds of Kenyan adults use the service today.

In fact, M-Pesa has become the largest driver behind financial inclusion in Kenya. Today, 66.7% of the country’s residents have access to formal financial services, compared to just 41.3% in 2009. In addition, 43% of Kenya’s GDP passes through M-Pesa.

But the service, which has also been quite successful in Tanzania, is not just the continental leader in mobile payments. It can additionally boast of operations in non-African countries where its parent company, Vodafone, operates, including Afghanistan, India, and even EU-member Romania.

Yet, it is important to note that mobile money, through which customers can transfer cash between each other, pay for goods and services without the need for cash, open digital savings accounts, and increasingly, obtain credit, has had mixed adoption rates on the continent.