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Mobile communications for development

January 11, 2012

Mobile communications for development Mobile communications for development Mobile communications for development

The use of mobile technology is strongly paving the way as a catalyst for change in developing nations. Let’s take a look at just one case of how m-banking in Kenya is improving the internal economy of rural villages, as well as the populations financial culture.

Recently I had the opportunity to assist an interesting talk by Ignacio Mas, subdirector of microfinances in the “Bill and Melinda Gates Foundation”. He shared some insight as to his recent experience   implementing mobile bank services in Kenya.

M-PESA (M for mobile, Pesa for money in Swahili) is a mobile phone -based money transfer service from Safaricom (in affiliation with telecom giant Vodafone). This service works as a branchless bank,  meaning that it enables users to make basic money transactions without stepping into a bank, through text messages and participating retail agents.

The service works in the following manner:

  • A customer buys credit or e-money through a local vendor (shop, gas station, convenient store, etc), the same way as you would buy a prepaid phone card
  • The customer can then send a text with e-money to a 2nd M-PESA customer to pay for a service or product.
  • That 2nd customer can retrieve the cash through a local vendor.

The outstanding numbers speak of the success that M-PESA is having in Kenya. The service was implemented in 2007 and by November 2011 had 14 million subscribers (over 50% of the adult population), 30000 agents across the country’s most rural and poorest areas carry the service, and more transactions in Kenya than Western Union makes in the whole world (not in amount of cash, but in amount of transactions).

Why does it work?

Ignacio Mas, whose work in Kenya allowed him to explore the social implications dealing with m-banking from within. He explained a few key points as to the success of the service.

  • Convenience

If a product or service is not convenient, it will not work. Traditional banking for the majority of the rural Kenyan population is not convenient. Not only is it not convenient in physical terms (bank branches are situated in urban areas which for the rural population means very long journeys walking and/or  bus, not being able to work that day which means not getting paid or not being able to take care of your children). It is also not convenient in relative terms…as in the social barrier that exists…that of social exclusion. Urban banks neither cater nor are comfortable for the average rural worker who would like to deposit a “modest” $10 a month in their account. Traditional banking does not adapt to the needs of this population and also does not seem to be interested in having them as clients. M-PESA presents real convenience because there is no need for the long, troublesome journeys to the bank, or going through the uncomfortable feeling that you are not welcome there. Retrieving cash is as easy as going to a local kiosk to buy a Kg of rice. Plus it has the convenience factor of security in a place where walking around with cash can be risky.

  • Simplicity

The service is simple  and cost-effective to implement because 80% of the population already have a useful mobile phone. Retail agents (kiosks, shops, gas stations, local convenient stores, etc) were eager to offer the product because they would gain a commission for handling the transaction which facilitated the widespread availability.

  • Client experience

Not only is M-PESA a service, it is also an experience. It facilitates people in reaching their financial objectives which otherwise is difficult to obtain. The main economic objective for workers in these rural communities is to be able to have some savings…either to buy a farm animal, to send their children to school, or to have in case of an emergency. Yet as we all know, having cash around the house makes it difficult to save, and as we established before the user experience of a traditional bank does not work for them. M-PESA makes it possible and convenient to effectively save $5 or $10 a month yet easily retrieve the money if the need arises. Although it is a money transfer service, it also serves a secondary and very important benefit in the development of finance education of these communities, that of a “savings account”.

  • M is also for Marketing

Just because your potential client base is extremely poor does not mean you don’t have to develop a strong insightful communications campaign to attract a seduce your customers. ”Send money home”- Out of all the benefits that M-PESA provides (security, convenience, simplicity, etc.), the one  unique value proposition that truly sold was that of sending remittances. The service was marketed to the young adult, the one whose parents were able to send to the city for an education and now has a job. That son/daughter wants to send money to their family  in a safe ans easy manner. M-PESA effectively caught on with this segment and they took on the task of explaining the concept and how the service works to their family.

In addition, “spreading the word” was largely taken care of by the vendors who promoted the service…For them it is a win-win situation. They gain a commission from the transaction (they are the ones who  have to make the trip to the bank  to cash in all the m-pesa credits)… And they also gain business because there is more customer flow in their store.

Watch commercial: 


  • Liquidity in rural areas

There is more cash flow in the internal economies of the villages where cash comes in and stays in making it easier for each rural community to grow independently.

  • Technology education

Although 80% of the population use a mobile phone in Kenya it is a device that is only known to serve voice communications. By introducing a new utility for the mobile phone, that of data transfer, the population is gaining technology education which otherwise would have taken many years to evolve and reducing (a least a bit)  the wide gap of wealth and knowledge that exist between developed and developing countries.