Dialled in to finance

Dialled in to finance

Telco believes it can pursue purpose as well as profits

 

One of Africa’s most successful shared value initiatives comes out of Kenya. In 2006, 400 bank branches and 600 ATMs served Kenya’s population of 36-million people. This meant 18.9% of Kenyans had access to banking infrastructure.

 

Another 7.5% made use of formal services through microfinance institutions, but the remaining population was either limited to informal mechanisms, such as savings groups, or completely unbanked.

 

The challenges the unbanked faced to pay bills, save, transfer money and otherwise hedge their financial risks were immense. One study found people were transferring airtime minutes as a proxy form of currency. With this information and leveraging the fact that while less than 25% of Kenyans have bank accounts, 80% had access to cellphones, researchers funded by the UK Department for International Development (DFID) to ask Vodafone to create user-driven mobile technology to provide banking and financial services for unbanked people and, by so doing, also unlock new markets for Vodafone.

 

Safaricom is the leading mobile services provider in Kenya and, together with Vodafone, initially designed a mobile-based product, M-PESA (“m” for mobile, “pesa” the Swahili word for money) to facilitate customer loan repayments to microfinance institutions.

 

Quickly seeing that most customers used M-PESA as a low-cost remittance service, Vodafone and Safaricom redesigned M-PESA as a mobile banking service that would allow customers to send money, deposit and withdraw cash, pay bills, purchase airtime minutes and transfer money between the service and a traditional bank account – all from their cellphones.

 

M-PESA works as follows:

  1. Safaricom users create an account associated with their name;
  2. In exchange for cash deposits, Safaricom issues e-float, a commodity measured in the same units as local currency, which is held in the M-PESA user’s account;
  3. The float is 100% backed by three commercial banks in Kenya, which donate the interest earned to charity, which allows Safaricom flexibility to operate outside of bank regulations in the country; and
  4. Once users place money in their account, they can make transfers to other people, deposit and withdraw money, and pay bills, incurring various small fees per transaction.

 

Users are able to deposit and withdraw money at one of more than 12,000 agents (such as Safaricom stores, gas stations, retail kiosks, and other neighbourhood shops accustomed to handling cash), which eliminates the need for visits to bricks-and-mortar bank locations and expands the network of financial agents who can provide access to needed services.

 

Following its launch in March 2007, the Kenyan population quickly adopted M-PESA, and its use has extended the effects of financial flexibility and security to millions of previously unbanked and underbanked Kenyans. Within five years of launching, M-PESA had grown to more than 14.5-million active users in Kenya, with billions being transferred using the technology every year.

 

Sanda Ojiambo“As a telco, we define our purpose as transforming lives,” said Sanda Ojiambo, head of corporate responsibility at Safaricom. “The reason why we say this is we have a firm belief we can pursue purpose as well as profits at the same time.”

 

In 2010, Safaricom established the M-PESA Foundation, which invests in health, environmental, conservation, education and water projects with the objective of improving the social and economic status of Kenyans.

 

 

 

Ojiambo will share her insights today with a presentation entitled Pursuing Profit With Purpose Through Innovation.

 

Article Source: Business Day

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