The year 2017 will probably be more associated with the forth-coming general elections in Kenya and whatever will happen thereafter but this is also the year M-PESA turned ten. M-pesa was launched in the year of our Lord 2007 and I can’t believe that ten years have passed since then. Yes, it was my first year out after campus looking lost in the streets of Nairobi, searching for what to do. I came to know about M-PESA just a few days after it was launched although I did not become I user until almost a year later in 2008.
Initially, I did not see a big deal about M-PESA, and that is why it took me like a year before registering to use it. That was so until the post elections violence happened in the early days of 2008. I had traveled upcountry on the day the violence broke out. For more than two months, I stayed at my aunt’s place, unable to travel back to Nairobi or to the nearby major towns. That meant that I could not access my bank account due to the violence and the the fact that the Bank I was using then did not have the reach in terms of branches and agents we have come to be used to these days. While in campus, we used to use Post Bank to receive our HELB loans. For most of us, it became our only bank at the time. When I came out of campus I was not in a hurry to open another account. Post Bank was very manual then. No ATM machine and you could only withdraw your money once a week using a green book. Those were highly inconveniencing factors if you think about them now but then, I thought it was good that I could only access my money once a week. I also thought that having an ATM card was not good for me since that would mean no restriction to my spending. So, the manual Post Bank served me well then until I could not access my money in those early dark days of 2008.
When things got back to normal, I found a way to borrow enough money to get me back to Nairobi with the promise that I would send the generous soul their money once I was back in the city. On the days that followed my arrival to Nairobi, two things were on top of my priority list; Get an easier and convenient way to send to my friend back in upcountry his money and to open a bank account that I could access at any time and from anywhere within Kenyan borders and beyond. M-PESA became relevant to me instantly and after confirming that my friend got his money, I became a fan for life. On the banking side, Equity bank was making a wave then and yes, I became a member.
Impact of M-PESA
In my on thinking, I don’t think there is single technology (debatable ) which has fundamentally changed this country to the level of M-PESA. The fact that we can debate whether it is Kenyan or whether it was a Kenyan idea makes it a unique piece of technology but that is a story for another day. Talking money-wise, M-Pesa has changed how people send money, receive money, save money, pay bills, buy goods and services.
A study conducted recently by Billy Jack, Georgetown University professor of economics and Tavneet Suri, of Massachusetts Institute of Technology, found out that that access to M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty within a period of six years. The study titled ‘The Long-Run Poverty and Gender Impacts of Mobile Money” found that the impact of M-PESA was more than twice the average measured in the female headed households. I have been thinking about this for a while since my friend Sam Wakoba posted the following on his Facbook page after sharing the above findings
“Economists, ye middle class people and realists please help me here: How is simplifying access to my money so I blow it up helping me rise out of poverty? The same thing that is sinking me into it. >Consumption is not = >Investments but just more debt.
Asking for a friend….”
The discussion that followed on that post centered on the circulation of money. The economists would tell you that money circulating creates demand and employment. M-PESA provides the means that money can be sent to every corner of the country. The money sent to any part of Kenya means there is more money in the hands of the locals and in turn they are able to buy more. For example X from Nairobi sends money to A in Rusinga Island, the money on A’s hand provides B with money for the exchange of tomatoes. From there, B is in a position or able to buy shoes from trader C who tops it up and buys a mobile phone from D. The effect in that case would require that the traders employ a few more guys to meet the increased demand. So yes, simplifying the access to money improves people’s standard of living.
From my own thinking, M-PESA effect in Kenya is more than what I have described above or was revealed by the study. By the end of last year, M-PESA had a network of 100,744 agents across the country while Lipa na M-PESA which allows for payment of goods and services, had 43,603 active merchants. All those agents and merchants directly employ young Kenyans most of them who are bread winners of their families. But that is just a tip of what the real value of M-PESA is to Kenya as a whole. Take the above scenario and add to the fact that the total M-PESA transactional value for the last financial year was Ksh.5.29 trillion. Huge. Kenyan total GDP value at the end of the year 2015 was US dollars 63.40, roughly Ksh.6.57 Trillion. What that means is that by the end of last year, roughly 80% of Kenyan GDP passed through M-PESA.
There are two developments about M-PESA that took place in the last few months that I think are great and progressive. First, the International Money Transfer East Africa. Customers are now able to carry out Inbound and outbound money transfer across East Africa in partnership with MTN and Vodacom. This pointS to a greater integration of East African community as well as enabling Kenyan citizens to travel within the region without the stress of carrying cash.
The other milestone was the Cost information being sent to customers. M-PESA customers receive information on the cost of each transaction. I think this was brilliant. What used to happen is that people used to do transactions without knowing the exact cost of the transaction. But now you can see the cost before and in most cases, the system asks you if you agree to continue…Awesome