M-Pesa helps Kenya to leapfrog neighbours

An M-Pesa agent serves a client at her stall along Kimathi Street, Nairobi. FILE  m-pesa

By John Gachiri

In Summary

• AfDB’s survey on financial inclusion in Africa found that 42 per cent of Kenya’s adult population has an account with a formal financial institution, the highest in the region.
• The report says that the rapid uptake of M-Pesa, run by Safaricom, has been the main catalyst in getting Kenyans to open accounts with banks, saccos and other formal institutions.

Kenya’s adoption of mobile phone money transfer and payments services has seen the country raise the level of financial inclusion to nearly double that of its neighbours, a report by the African Development Bank (AfDB) has shown.

AfDB’s survey on financial inclusion in Africa found that 42 per cent of Kenya’s adult population has an account with a formal financial institution, the highest in the region.

In Uganda, the proportion of adult population with a formal account stood at 20 per cent, Tanzania (17 per cent), Rwanda (33 per cent) and Burundi (7 per cent).

The report says that the rapid uptake of M-Pesa, run by Safaricom, has been the main catalyst in getting Kenyans to open accounts with banks, saccos and other formal institutions.

“Safaricom launched the scheme in Kenya in March 2007 and since then it has reached more than 40 per cent of the adult population in the country, doubling the number of Kenyans considered financially not-excluded.

“This success prompted development finance institutions (DFIs) to invest in the mobile banking sector and grasp the huge opportunity to improve financial inclusion throughout the continent,” says the AfDB.

Regionally, Mauritius had the highest fraction of adults with formal accounts at 80 per cent, South Africa (54 per cent) and Nigeria (30 per cent).

AfDB says more African countries are investing in mobile banking, inspired by M-Pesa which has proved to be an efficient service at getting more people to join the formal finance system.

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

Uganda has seen DFIs pledge funds for research into banking products that will make use of MTN Uganda’s mobile money transfer service.

In 2012, MTN Uganda, the Grameen Foundation which is associated with Nobel Peace Prize winner Muhammad Yunus and CGAP, an international think tank on increasing financial access in low income countries pledged to invest $1 million on the venture.

“To achieve our goal of financial inclusion for all, the industry needs to move beyond mobile payments and provide a full array of pro-poor mobile financial products,” said CGAP’s chief executive Tilman Ehrbeck at the time.

M-Pesa’s rapid uptake, estimated to have been growing at 30.37 per cent over the past three years, has seen banks come up with products based on the popular service that has increased the number of customers.

Data from the Central Bank of Kenya (CBK) says that by June 2013 there were slightly over 20 million deposit accounts which was made possible by M-Shwari, a product by CBA and Safaricom that was introduced in November 2012.