This simple Technology is what makes the difference in Africa's remotest areas and the unbanked
With the rest of the world gearing up towards modern technologies beyond web2 and web, MPESA has just remained that simple and grounded in its initial mission of enabling access to financial services.
If you haven't been to Africa, especially Kenya, then you should plan as soon as possible and visit, just to marvel at the simplest technology that does wanders. You have known advanced, powerful technological tools rooted in AI such as ChatGPT (+) with large language models, iPhone with meticulously designed softwares, alongside its ecosystem with almost anything that you require for seamless and comfortable life- and so you expect more of sophisticated technologies that aren't less than what you have seen and use. From Web2 to web3, you want something that is novel and that makes you become an early adopter. Psychologically, human beings normally yearn for new things and that becomes a social trend of imitation as seen in the recent mass sign up of the Meta' Thread (I bet most people who registered haven't used even). It is undeniably true that the modern technological tools are too powerful, useful, and complex, but what if I told you that the effectiveness of any tech device is grounded in simplicity and its purpose. As a tech-savvy, you are probably attracted by sophisticated features that challenge your understanding and the way you do things. However, to me, it seems we have forgotten the overall why or the social impact of the new or existing technology.
But, with M-Pesa, this is not the case.
M-Pesa was established in March 6 2007 by Safaricom (in conjunction with Vodafone with a 35% of shares ad of 2007), a telecommunications company domiciled in Nairobi, Kenya. It commenced with a pilot study of Faulu Bank customers in 2006, a local bank with clients in the remotest areas whom the majority of them are farmers and with no bank accounts.
M-PESA (pesa means money and m stands for mobile), after it was first rollout in the market, attracted more than 10000 customers during the first 2 weeks as per the Guardian in 2007. Since its establishment, it has become one of the largest fintechs in Africa with more than 50 million customers as per the Statistica.
How it works
While one buys a SIM card from Safaricom, it is integrated with M-PESA but they need to register themselves to unlock its usage. With a simple phone (one does not even need smartphone), customers are only required to register for the service at authorised agents such Safaricom centers or small-scale businesses like duka (shops), butcheries, kinyozi (barber shop), and established retailers including supermarkets. MPESA is an SMS-based transaction where one completes a transaction by entering a secret PIN. Thereafter, a message is sent to both recipient and the sender confirming that they have received money. Usually, customers will visit a retailer, be it a shop, barber, butchery, or any other entity offering the service, and deposit cash in exchange for electronic cash which is redeemable at any other authorised agents. Similarly, they can use MPESA in other ways such as buying credit or buying goods and services.
Social Impact
However, I am not concerned with how it was developed or who owns which shares but rather the substantial social impacts it has had on common people with no fat pockets to buy modern smartphones. MPESA, designed in mind with those in remote areas and without banks, has not drifted away from its eternally ingrained mission. It is imperative to note that almost 90% of the people as of 2007 had no bank accounts, with the majority of them being rural farmers. Rather, Safaricom, the parent company, has increasingly and advancedly bolstered its network to reach rural areas. Beginning on March 6, 2007, the simplest mobile technology awakened the once sleepy villages and introduced them with the seamless way of sending and receiving money from their comfort of their mud-constructed houses.
Tea farmers in the remotest region can be paid their salaries without having to travel. In the past, cash was king as most of them were unbanked, with the exception of a few who were privileged to be exposed early. Similarly, milk farmers in Marsabit (the driest land in Kenya and with a few banks) can receive and withdraw money from any authorised agents (and which are many). The technology has morphed slowly to fit into the lives of ordinary people not only in Kenya, but also in Africa since it has expanded into Tanzania, Mozambique, Congo, and Malawi.
My Story
My first encounter with M-Pesa was in 2011 when I was joining university. I had never even heard of until when my father who had accompanied to the school asked me for my phone number. Immediately, a message on my kabambe (a slang for a simple phone) phone (techno phone with buttons) that only costed me $20 to buy popped up on my cracked small screen. I didn't know what was it until my father told me in my local dialect that "karayoku rabinik kobwa simoit" ( I have sent money to your phone). With confusion and shyness greasing all over my face (remember I was still too young and naive), I didn't object. I only escorted him to the bus stop to board a matatu, as that is the only means of transport in Kenya and Africa if you don't have a personal car.
Over 2 months, I had money in MPESA, but I didn't know I had (forgive my serious innocence). I called my mother one day and told her that my dad didn't give me money while he admitted me into college. I only knew that money was supposed to be in cash and not any other medium. My mother was astonished and inquired angrily from me why I wasted money that my dad had sent me. "Koiyalenee rabinik?" (What did you buy with the money). She shouted over the phone. But, I innocently objected that he didn't give me money. As old as she was, my mother seemed to have understood that I had no knowledge of MPESA and educated my whole self about it. My father too extended the same courtesy of imparting me with the simplest technology on earth. Pregnant with MPESA skills, I also became one of the authorised agents to conduct its services after 1 year only since the initial capital needed was low.
Reflecting on the journey of MPESA and how it has turned out to be a must-have mobile money service, I know there are also other people with similar stories. Every time I am in the soko (open market), I can see the elderly traders who might not have been privileged to learn beyond primary schools using this noble technology. MPESA has become a savior and life-changing among the common as they would not have had otherwise if the mobile services were only transacted through apps.
Through MPESA, customers can access overdraft as long as they are using it to carry out their activities. Dubbed as Fuliza, clients can only confirm themselves as the user for them to be allowed to borrow when they run out of money in their virtual accounts. When it was first launched in 2019, payouts reach $81million with the first 3 months. So far, estimates indicate that Kenyans borrow $16000000 every day as of 2021.
Truly, the nexus between MPESA and the common people has become a realistic story to tell to the entire world.
What Next?
I don't know how MPESA will turn out to be in a competitive fintech landscape, but this will be dependent on many multifaceted factors in play such as a shift in demography and the level of education especially among the millenials and Gen Z. Also, given the recent rollout of the digital currencies by Central Bank of Kenya, I can't predict how MPESA will be affected due to fact that new entrants have had a hard time challenging it.
Notes
https://www.vodafone.com/about-vodafone/what-we-do/consumer-products-and-services/m-pesa
https://www.google.com/amp/s/amp.theguardian.com/money/2007/mar/20/kenya.mobilephones
https://kenyanwallstreet.com/fuliza-hits-ksh29-billion-lending-mark/
https://www.google.com/amp/s/www.standardmedia.co.ke/business/amp/business/article/2001456831/fuliza-economy-kenyans-borrow-sh16b-daily-amid-economic-woes
MPESA sounds a lot like a mobile version of Western Union, which probably stood as a mainstay for the unbanked in the USA for the last 100 years, give or take. Is that a good analogy?