By Karen Stiller
This article appeared first on The United Church Observer, 'Seven Innovations for A Better World'.
Cellphones are ubiquitous in the developing world, for the rich and the very poor alike. Institutional banks who will do business with the poorest of the poor? Not so much.
The latest statistics, released in January of this year, record 25.3 million mobile phone subscribers in the east African nation of Kenya. “Africa is now the second-largest mobile market in the world, after Asia, and the fastest-growing mobile market in the world,” says Peter Gakure-Mwangi, a blogger who writes about the economy and trends in Kenya. “More people in Kenya have access to a mobile phone than they do to a clean toilet.”
The upward surge of mobile phone users is the same in every continent. But it’s not the cellphone itself that is the innovation here. That would be very old news.
Instead, it’s the way cellphones are being used for banking. M-PESA is a mobile phone money-transfer service developed — first and foremost — as a more efficient way for microcredit clients to repay their loans, without having to make long, expensive journeys to city centres. M-PESA quickly grew beyond the microcredit world, however. For example, it’s become the preferred method for city-dwelling income earners to “text” funds back home to rural areas, where recipients can turn the text into instant cash through a nearby M-PESA agent.
Economists are watching. So are aid and development workers. “M-PESA is more accessible than other banking and money-transfer options in Kenya, thus even the poorest and less educated are able to run banking services using telephones,” says Richard Lankas, a senior technical specialist with World Vision Kenya. Innovations like M-PESA can even change how aid is distributed, enabling fast and direct cash transfers in times of emergencies. “With cash, people can buy food from local markets and directly impact these local markets,” explains Lankas. And improvements in the local economy help everyone.
The ease, safety and speed of M-PESA mean that more money is changing hands more often, usually for things like school fees, food supplies and, of course, household bills.
M-PESA has been adopted in Tanzania and adapted in Afghanistan, where it is known as M-Paisa. In 2010, M-PESA spread to South Africa. And a 2011 agreement with Western Union means that M-PESA users in Kenya can now receive mobile money from senders in 46 countries around the world, opening the doors — and virtual wallets — to even more cash flow and spinoff economic growth. The letter “M” in M-PESA stands for mobile, while “pesa” is money in Swahili. Bringing those two together could be one of Africa’s most significant economic innovations yet.