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Creating Impact In India Through M Pesa

2640 words - 11 pages

About M-Pesa

Kenya stepped into the arena of mobile money transfer services in 2007 through the successful launch of M-PESA by Safaricom1, a mobile network operator (MNO) (Mas and Radcliffe, 2010).
Safaricom is the leading mobile network operator (MNO) in Kenya, and an affiliate of Vodafone Group- a British multinational telecommunications company. The mobile phone acts as both a wallet and a bank account. Kenya’s M-PESA is not the first mobile money deployment; however its rate of adoption has been unprecedented. The first sustainable mobile money system was launched by Smart Money, in 2001, in the Philippines. Based on an exchange rate of $/KES 85.

M-PESA is a mobile payments ...view middle of the document...

5 billion adults do not have a formal bank account, and yet about 6 billion people have access to mobile phones (86 percent penetration rate) (ITU, 2011; Demirguc-Kunt & Klapper, 2012, 11). Most of the unbanked population reside in the developing regions of the world such as Sub-Saharan Africa where only 24 percent of the adults have a formal bank account. However, the region has a mobile phone penetration rate of over 60 percent, which provides a readily-available platform to roll out mobile money services5 (Demirguc-Kunt & Klapper, 2012, GSMA, 2011). The adoption of mobile money services in Sub-Saharan Africa is particularly important because increased financial access can have a positive impact on long term economic growth through reducing poverty and income inequality (Clarke, 2002; Beck et al., 2004; Levine, 2005). Indeed, many believe that financial inclusion of the wider population is a key tool for achieving the Millennium Development Goal (MDG) of eradicating extreme poverty and hunger.
Mobile money services yield a number of documented benefits to providers, users and the government, including facilitating transactions (Mas & Radcliffe, 2010; Jack & Suri, 2011a), increasing money circulation in the economy (Demombynes & Thegaya, 2012), enhancing money security (Plyler et al., 2010), facilitating social capital accumulation (Plyler et al., 2010; Morawczynski, 2008), creating employment opportunities (Plyler et al., 2010), reducing economic vulnerability (Jack & Suri, 2011a), fostering entrepreneurship (Kendall, et al., 2012), increasing savings (Demombynes & Thegaya, 2012), and promoting financial autonomy (Morawczynski, 2009; Jack & Suri, 2011a). Despite these many benefits of adopting mobile money, no country has managed to match the speed and extent of M-PESA uptake in Kenya, not even in the neighboring Tanzania where the same business model and implementation strategies were employed. The statistics indicate that the launch of M-PESA in Tanzania by Vodacom only managed to attract about 280,000 users within 14 months of its launch, while Safaricom’s M-PESA managed to garner 2.7 million users within the same timeframe (Rasmussen, 2009).
The findings indicate that the remarkable success of M-PESA in Kenya was influenced by three key aspects. First is enabling country conditions present during the implementation of M-PESA such as the right amount of existing banking infrastructure, the poor quality of alternative financial services, the favorable urbanization ratio, the higher mobile phone penetration rate, the higher level of financial literacy, the level of economic development and the presence of a national identification (ID) system. Second is the effective operation strategies employed by Safaricom in Kenya, such as tailoring the marketing of the product to the needs of the population, and its ability to effectively build an agent network. Finally, the success of M-PESA in Kenya is owed to the...

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