M-Pesa

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Since arriving in Kenya we have noticed an enormous number of mobile phone kiosks with locals showing their phones to the vendor and receiving cash in return. It turns out that Kenyans are making use of the prevalent mobile networks (they have pretty much bypassed the infrastructure for landlines and skipped straight to mobiles), to carry out basic banking transactions.

Instead of a Kenyan needing a bank account, or having to use the very expensive Western Union or similar, they can use their mobile phones to deposit, withdraw and transfer money. It can even be used to pay for goods, much like a debit card, in shops that are registered for use. The system, called M-Pesa (pesa is Swahili for money) has been going since 2007 and there are over 17 million accounts in the country enabling the majority of Kenyans access to a much more efficient method of money transfer than the more traditional banking system allows.

The system was initially launched to enable Microfinance Institutions to offer more competitive loan rates to their users as there is a reduced cost relative to dealing in cash. But when the service was trialled, it offered such an effective way for Kenyans to transfer money to one another, pay bills etc that they adopted it for a variety of alternative uses. It is a really great innovation to see.