How do you pay the doctor’s office in Kenya? By SMS!

Imagine you live in Kenya in the middle of nowhere. Your whole family has saved money, so you can go to university in Nairobi, to have a better future.  After university you manage to find a job in Nairobi and soon you earn more money than the rest of your family. To support the family – who still lives in Kenya’s far north - you want to send them some money every now and then. But what is the best way to do that?


By bank transfer is no option. Your family does not have a bank account and the closest bank is a 30-kilometer-walk away. Send it by regular mail? The chances are high that your envelope with money will never reach your family. And travelling for two days up north by bus every time is also not a real option.


Currently, 93 percent of Kenyans are mobile phone users. A major success factor of mobile telephony in Africa is the scarce diffusion of fixed line networks. Of about 400,000 rural settlements that are estimated to exist in Africa, less than 3% have fixed line access. Mobile telephony providers have taken advantage of this situation: approximately 90% of rural settlements in Africa now have GSM coverage.


In April 2007, following a student software development project from Kenya, Safaricom launched a new mobile phone based payment and money transfer service, known as M-Pesa (M for mobile, pesa is Swahili for money).


The initial concept of M-Pesa was to create a service which allowed microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers. But after discussion with other parties, M-Pesa was re-focused and launched with a different value proposition: allowing users to deposit money into an account stored on their cell phones, to send balances using SMS technology to other users, including sellers of goods and services, and to redeem deposits for regular money.


M-Pesa is a branchless banking service, meaning that it is designed to enable users to complete basic banking transactions without visiting a bank or even without having a bank account.


M-Pesa has spread quickly, and has become the most successful mobile phone based financial service in the developing world. By 2012, about 17 million M-Pesa accounts had been registered in Kenya alone! Although in many countries mobile payment systems only slowly take off, M-Pesa keeps expanding; it is now also used in countries like Afghanistan, South Africa, India, Tanzania and Romania. At this moment there are 150 mobile payment systems in the developing world for 30 million active users. In some countries like Kenya, Madagascar, Tanzania and Uganda, there are even more mobile banking services than bank accounts.


Thanks to these mobile payment systems, people carry less cash around which means greater safety. Moreover, mobile payment supports economic growth.


The number of mobile payments services will be expanded with other services like micro financing, savings accounts, micro-insurances like health care insurances. Currently The Mobile Health Research Lab in Nairobi, Kenya, researches how mobile money can be leveraged to pre-pay for healthcare. The lessons were obtained while conducting experiments with a "mobile health wallet", i.e. earmarked money that can only be used to pay for healthcare at selected healthcare facilities. If successful, the service will be expanded in 2015.


Mobile payment is in many countries still in its infancy, but using your phone to pay for goods and services is nothing new in Africa!


Elske van der Horst

June 2014


The somewhat outdated video (2010) below gives you a good idea of how M-Pesa works.





Elske  |  2014 06 13  |  Permalink  |  Share

1 reaction

Jan  |  2014 06 14

Very informative, thanks


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