It’s easier to pay for a cab ride in Kenya on your mobile phone than it is just about anywhere else in the world. Almost 80% of people with cell phones use them for mobile payment and banking (and three quarters of the people in Kenya own cell phones), primarily through the M-Pesa system. Half of all mobile money transactions in the world take place in Kenya, where annual transfers have reached $10 billion.

About 60% of Kenyans living on less than $2.50 a day have mobile phones. Kenyans, even those at the bottom of the economic pyramid, have adopted the technology faster than any other African country. This rapid adoption was spurred by the invention of M-Pesa, which was created in 2007 by Safaricom, Kenya’s leading mobile service provider.

“The idea of mobile banking was born in Kenya,” said Calestous Juma, the director of the science, technology, and globalization department at Harvard and a recognized authority on technology and development in Africa. “Africans did not invent mobile phones, but they invented a new way of using mobile phones, which is for money transfer.”

If Africans had waited to invent their own phones, Juma said, they wouldn’t have been able to take advantage of this opportunity and create a new market.

“Since this has been done in age of telecommunications with such a huge global economic impact, it helps Africans feel like they can become players in global economy and help development,” he added. “It’s inspirational for Africans. They don’t have to invent, but they can adapt it to different uses for them and become innovators.”

The “M” stands for mobile; “pesa” is the Swahili word for money. The system was originally designed for microfinance loan payments, allowing people to transfer money without cash to lower interest rates. It was a joint venture between Safaricom and Vodafone, the mobile phone company, which partially owns Safaricom.

Once customers create an M-Pesa account, they put cash into the system through one of Safaricom’s 65,000 outlets, now located all over Kenya, typically in gas stations and shops. The money can then be transferred to another person through text message, and then picked up at another M-Pesa outlet. There are now more than 500 bulk payment partners throughout the country.


Mobile technologies are much easier and more accessible than any type of landline, which are unavailable in most areas of Africa. There are massive obstacles with energy — most places have no electricity. Unbelievably, some people even ship their mobile phones to charge them.

“Energy is becoming the biggest barrier to greater connectivity,” Juma said. “With the transition to broadband technology, all those smartphones that use broadband use power, so there is an energy challenge of how to expand to rural [areas].”

M-Pesa has served as a model for Kenyans, specifically in relation to building civic infrastructures and physically connecting rural areas. It seems counter-intuitive, but Africa is building an infrastructure from technology. The mobile phone system, because it was so rapidly adopted, has become a model for how goods, services, and ideas should be transferred. Mobile phones have become the best example of the power of connectivity, Juma said.

To date, Safaricom services 17 million people in Kenya. About 25% of the country’s gross national product flows through the system. The success of M-Pesa is a combination of many reasons, including the domination of Safaricom in the mobile market and the high rates of families sending money home to Kenya from abroad. One study from the University of Edinburgh showed that rural households saw their income increase anywhere from 5% to 30% when they used M-Pesa.

“The social, political, and economic spectrum are going to be affected by connectedness” said said Erik Hersman, co-founder of iHub, Nairobi’s tech space for hackers, innovators, and developers, and co-founder of Ushahidi, an open source mapping platform developed in Kenya. of the spread of mobile technology access in Africa. “Once you get over that 20% of these people that are connected to the internet in some way, whether that’s a smartphone or other, things get interesting. The norm is no longer the norm and everything changes.”

A prime example is the adoption of M-Pesa, which since its launch in 2007, has inspired many tech startups in Nairobi. The city has become the tech innovation hub in Kenya, and one of the hottest tech hubs in Africa, and is continuing to grow.

“Mobile money is still a big thing, so people who build secondary service around that, will continue to do well,” Hersman said.

Because of the success in Kenya, Vodafone is spreading M-Pesa to India and Afghanistan, as well as other areas of Africa such as Tanzania. There are also several spin offs of the M-Pesa system in Kenya, including:

  • Lipa Na M-Pesa allows people to pay their fares for the Matatu public transportation service with mobile devices instead of cash. The plan was announced at the end of last year. It is competing with Google’s Beba Pay, an electronic card compatible with several bus systems, and Kenya Bus Abira Card, a prepaid card for transportation fares.
  • Lipa Karo allows customers to pay for school fees through mobile phones by depositing money through one of the outlets and sending it to the school administrators via a specific code. There is also a reduced risk of theft since the school does not handle the cash.
  • Lipa Kodi is a service that lets Kenyans manage and pay rent through mobile transactions among banks, landlords, tenants, and homeowners.
  • M-Shwari is a partnership between Safaricom and the Central Bank of Africa. It allows customers to take out loans and save money on their mobile phones through a mobile banking system. The program has had success since its launch in 2012, boosting the number of bank accounts in Kenya.
  • Diaspora remittances were most recently added to the list of Safaricom’s services. The company partnered with Skrill, a UK-based online payment company. All the customer needs is a full name and M-Pesa account number to transfer money back home to family or friends in Kenya. Skrill charges a 1 percent fee for each transfer. Kenya diaspora inflows rose 10 percent in 2013 to $1.3 billion.

However, most of these other applications have not yet caught on in the market. According to a study done by the World Bank in partnership with iHub and Research Solutions Africa, most of the participants who were considered in the bottom of the economic pyramid that owned a phone did not use it for any applications other than M-Pesa. This was primarily due to lack of awareness and marketing, and confusion about the apps.

So what can we learn from how Kenya has adopted this technology earlier than the rest of the world? For one, it shows emerging markets can also be leaders in the tech industry since they don’t have the barrier of legacy technologies to get in the way. It also serves as a model to bring low-income, isolated populations into society by circumventing infrastructure problems, no matter what they are.

“Kenya one of the earlier countries to liberalize this telecommunication system,” Juma said. “There is more visibility and it is a pioneer in that regard.”