“One way that someone could make money in this country is to import real football shirts,” says Eddie, Euromoney’s entrepreneurial driver in Nairobi. Euromoney’s slightly blank look in return prompts him to explain further. “I love football, we all love football and people want the shirts,” he points to a man across the street wearing the Manchester City shirt of Carlos Tevez. The man is walking underneath a Samsung billboard showing a series of Chelsea players surrounding Samsung’s latest TV. “Even those in the rural areas will spend their money on them – and now they have more money than before to spend.”
However, new-found wealth in the rural areas isn’t the result of robust growth in Kenya – on the contrary, Kenya grew only 1.7% in 2008, down from 7.1% in 2007. Instead, this new lease of money is mostly the result of a more efficient money transfer system in the form of M-Pesa. With nine million customers signed up, the M-Pesa product is a life-changing phenomenon for rural Kenyans.
M-Pesa was the brainchild of Vodafone, a shareholder in Safaricom, after the company noticed a gap in the money transfer market. Through the M-Pesa software, which is embedded on Safaricom SIM cards, customers can transfer money from mobile accounts on their phone handsets for others to access. The system has not only been used by family members working in the city to transfer money to loved ones in the rural areas, but also for paying utility bills, dividends and building supply arrears.
A client must open an M-Pesa account and have a Safaricom SIM card to transfer money via M-Pesa. Account holders can then get cash from their M-Pesa accounts from agencies that have sprung up all over the country. Even non-customers can collect funds from an M-Pesa agent or banking partner for a small fee once they are in possession of a number code for the transfer and one form of identification.
When M-Pesa was launched the company set about opening up small agency stores quickly and efficiently. The small agencies enabled customers to access the cash that had been wired to them via M-Pesa account holders. Initially banks were not invited to join the party but as the product expanded so banks are increasingly obliged to establish partnerships with the mobile money company.
James Mwangi, chief executive of Equity Bank, the bank with the largest customer base, even goes so far as saying: “M-Pesa was the best thing that ever happened in this country. It has made people conscious of the power of technology. It is also a platform that people can jump from into the banking system when they realize that ATMs could be more reliable than an agent.”
People that would never normally walk into a bank are using the branches as a point to collect their funds and the banks are taking advantage of this to sell their own products. “With more people coming into the banks, so you are seeing innovation around this like crop insurance products,” says Aly-Khan Satchu, chief executive of Rich Management, a Kenya investment advisory firm.
“You are seeing a widening of the product pipeline as banks slice and dice products to suit demand right to the bottom of the pyramid. There is a lot of cheap money at the bottom which banks are now trying to tap into.”
In turn, the banks focused on a rural growth strategy are on track to post good loan portfolio growth figures, while companies working in the countryside are seeing their businesses become more efficient and stable. “If money is circulating more efficiently, that can only help the economy and M-Pesa has gone a long way to do this,” says Satchu. “Money can be sent on time, which is making the whole market move more efficiently. People are doing and affording construction work in rural areas which is driving the economy forward in these areas.”
But it seems there is still a wide gap between the banks and M-Pesa. On Euromoney’s last day in Nairobi Eddie insists on visiting Nairobi’s main street market. Each makeshift stall has mats on the floor separating the mud track between each stall from their ‘shop’ front displays. But despite the apparently simple market structure, several sellers hold mobile phones and there’s an M-Pesa unit just metres from the market exit. A lady selling soapstone bowls declares Eddie is robbing her blind with his hard haggling tactics. When asked whether she has a bank account the lady smiles: “Those banks rob you too. Why would I need a bank account when I have M-Pesa?”
see also:
Kenya takes stock
Kenyan politics – still on the radar
