Africa eyes M-Pesa model as mobile phone use goes up

Ms Wambui Wainaina, an M-Pesa agent in Nairobi,  serves a customer. Growing use of mobile phones in Africa provides huge potential for innovation in money transfer services such as M-Pesa. Photo/PHOEBE OKALL
Ms Wambui Wainaina, an M-Pesa agent in Nairobi, serves a customer. Growing use of mobile phones in Africa provides huge potential for innovation in money transfer services such as M-Pesa. Photo/PHOEBE OKALL 

The number of people owning mobile phones in Africa has grown to 735 million, setting the stage for mass adoption of Kenya’s money transfer model by countries keen to enhance access to financial services.

A policy brief from the office of the African Development Bank’s (AfDB) chief economist Mthuli Ncube relies on the annual average growth of 30 per cent in mobile telephone use on the continent since 2000 to arrive at the figure.

Africa had 620 million subscribers at the close of 2011, 19 million of them in Kenya.

The rapid adoption of mobile money transfer services in Kenya since Safaricom launched its M-Pesa in 2007 has quickly caught the attention of other mobile telephone operators on the continent.

The stage is now set for the model to be replicated throughout the continent as more countries seek to boost access to financial services among citizens.


“Drawing on Kenya’s successful experiences, many low-income African countries have followed suit, adopting the model to extend access of the unbanked population,” says the report titled Mobile Money Services, Regulation and Creating an Enabling Environment in Africa.

Mobile money transfer gained international acclaim after Safaricom launched M-Pesa in 2007, allowing more Kenyans to move substantial amounts of money over long distances safely, efficiently and at lower cost.

The model has fast caught the attention of banks and even forced some transport companies out of cash transit business.

In Africa, M-Pesa was received as an improvement on the business-to-business (B2B) payment service which was tried in Zambia by Celplay 2002 and a similar service tried out in South Africa by First National Bank in 2005.

The AfDB economists see mobile platform as a way of expanding financial services to Africa’s maginalised communitites especially in blocs such as the eight-member West African Economic and Monetary Union (UEMOA).

“When one compared M-Pesa’s retail network with UEMOA financial institutions’ network, Safaricom is found to have far more agents,” the report says.

It cites the 2009 figures when the company had over 12,000 retail agents handling over 8.5 million customers compared to UEMOA’s total number of 100 bank branches, 402 micro-financial institutions and 18 non-banking ones that run 3,800 branches at the time.

The recognition of Kenya as driver of mobile money transfer innovation extends beyond the continent.

“Ever since Safaricom came up with M-Pesa, Kenya has been a leader in the field of technology-enabled financial services delivery.” says Elizabeth Littlefield, CEO of Overseas Private Investment Corporation, a US government development institution which mobilises private capital and helps its firms to gain foothold in emerging markets.

“Kenya is far ahead of other countries in the African region and frankly far ahead of the rest of the world in providing access to financial services to a big proportion of the population,” she told Business Daily when she visited Kenya recently.

At the time of the M-Pesa application, there were only 1.5 bank branches per 100,000 people and only one Automated Teller Machine per 100,000 people, AfDB notes in its policy brief.

Data from Central Bank of Kenya indicates that money transfers through mobile phones reached Sh1 trillion in 2011, a third of the country’s economy. In the last month of that year alone, CBK shows that M-Pesa was able to move Sh116.6 billion, followed by Tangaza’s Sh1.31 billion.

Airtel Money transferred Sh420 million, Orange and Yu each moved Sh20 million while MobiKash handled Sh4 million.

Sending money using mobile phone platform costs as low as Sh10, a magnet for low income earners alienated by high cost of conventional banking services.

“Most Kenyan citizens were unhappy with bank services (when M-Pesa was launched). This explains the easy switch to mobile money,” The AfDB brief says.

Buoyed by the speed at which customers have embraced the simplicity of mobile phone-enabled money transfer, most banks have either forged partnership with telcom firms or launched agency banking in the race to conquer the bottom of the market.

Latest CBK statistics show that 10 commercial banks had contracted 14,168 active agents handling over 24.7 million transactions valued at Sh144.2 billion.

This was a phenomenal growth over the nine banks that had contracted 12,054 active agents to undertake 18.7 million transactions valued at Sh93.1 billion in June 2012.