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Kenya Trail-blazes in Mobile Banking in Africa

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Mobile banking has grown 200% in developing countries such as Kenya where more people own mobile phones than bank accounts. (Photo: Jeff Vergara)
Mobile banking has grown 200% in developing countries such as Kenya where more people own mobile phones than bank accounts. (Photo: Jeff Vergara)

BUSINESS

  • In 2010, 15 million Kenyans performed $7 billion worth of commercial transactions, or one fifth of national GDP
  • Now nearly 70% of adults in Kenya have access to financial services compared to less than 5% five years ago
  • IBM is interested in Africa’s  expanding mobile-banking market

Kenya’s success in mobile money transfer technology is proving to be a role model and case study for countries in Africa and beyond that seek to replicate the country’s success in mobile banking.

Kenya’s mobile money transfer system enables easy access and transfer of money across the country via the mobile handset, a ground breaking innovation in Africa where banking services are not widely accessible, especially to people living in rural and poverty-stricken areas. The mobile channel is also a more accessible banking platform since phone ownership in most African countries is usually well over 50% of the adult population.

Mobile money transfer activity has been found to spur greater economic growth in Kenya as it boosts trade and commerce across various layers and sectors of the economy. That should excite African countries wishing to spur economic growth in their own countries. In 2010, for example, 15 million Kenyans performed $7 billion worth of commercial transactions, an amount equivalent to one fifth of the country’s GDP. The country’s leading mobile payment system, M-Pesa, is now used for everything from paying utility bills to school fees.

Mobile banking offers safety, convenience and real-time transaction settlement. It is this workable and practical money transfer solution that has inspired Africa’s telecom operators and financial players to study and seek to replicate Kenya’s mobile money transfer success.

Financial Inclusion & Service Penetration

Mobile banking in Kenya has spawned agent banking where a bank appoints a local agent to facilitate transactions with local mobile subscribers without having to open a full-fledged branch and incur related costs. In addition, mobile banking subscribers can connect their mobile phones to their bank accounts for commercial transactions. This serves to improve financial inclusivity.

Private industry reports contend that since the creation of Kenya’s first mobile money transfer system, called M-Pesa, in 2007, almost 70% of the adult population now have access to financial services compared to less than 5% five years ago.

Mobile banking in Kenya has led to increased service penetration as service providers feel comfortable offering their products and services to a broader segment of the population who now have a payment channel.

Africa’s mobile banking sector has attracted the attention of the world’s biggest computer services provider – IBM. Since 2006, the firm has pumped $300 million in new African ventures and plans to have a footing in at least 23 countries by 2015. IBM desires a piece of Africa’s growing mobile-banking market by actively engaging in the African telecoms field, where spending in the related IT field is expected to reach almost $13 billion by 2015.

Key Statistics – Kenya’s Mobile Industry

  • By the end of 2010, Kenya’s mobile subscribers numbered almost 23 million; this indicates a mobile uptake number of around 63% with room for greater growth in the future (source: Dion Global Solutions).
  • Kenya’s leading mobile operator, Safaricom, has seen its M-Pesa money transfer system generate increased revenue of up to 48% of the company’s total revenue, which was over $200 million in the 12-month period ending March 2010. SMS revenue contributed 33% of total revenue while mobile broadband revenue constituted 19% of total earnings (source: Paul Budde Communication Pty).
  • Mobile banking has grown by 200% in developing countries such as Kenya where more people own mobile phones than bank accounts (source: TNS International).

Key Players – Mobile Industry in Kenya

Company   Mobile Payment    Platform Ownership
1. Safaricom   M-Pesa    Vodafone (40%, Public Float 60%)
2. Airtel   ZAPBharti    Airtel (80%)
3. Yu   Yu Cash    Essar Group (80%)
4. Telkom Orange   Orange Money    France Telecom

By Patrick West for
Patrick West is a print and internet journalist who covers news and trends in business, technology, economy and finance.

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