M-Pesa and Africa's Mobile Money Revolution

How a mobile phone payment service launched in Kenya in 2007 brought financial services to millions and became a model for the world.

In 2007, the Kenyan mobile network Safaricom, partly owned by Vodafone, launched M-Pesa, a service that let people send and receive money using basic mobile phones. It grew with extraordinary speed and transformed how Kenyans handle money.

How it works

Users open an M-Pesa account linked to their phone number. They deposit cash with a local agent, often a small shop, and receive electronic money on their phone. They can send it to anyone by text message, pay bills or withdraw cash from another agent. No bank account is needed.

Why it spread so fast

Many Kenyans had phones but no bank accounts.
Workers in cities needed a safe, cheap way to send money to families in rural areas. Before M-Pesa, they often sent cash with bus drivers or travelled home themselves.
A large network of agents made depositing and withdrawing cash easy.
The Kenyan central bank allowed the service to operate and grow.

Within a few years, most Kenyan households were using it.

The evidence

A widely cited study by Tavneet Suri and William Jack, published in Science in 2016, found that access to M-Pesa lifted an estimated 194,000 Kenyan households, about 2 percent of households, out of extreme poverty. The effects were especially large for households headed by women, many of whom moved from farming into business or retail work. Mobile money also helped households cope with shocks, as relatives could quickly send money after illness or a bad harvest.

A shock absorbed

A farming family's crop fails. Before mobile money, relatives in the city might learn about it weeks later and struggle to send help. With M-Pesa, a son working in Nairobi sends money the same day, and the family buys food without selling its livestock. The quick transfer prevents a temporary shock from becoming lasting poverty.

Beyond Kenya

Mobile money spread across Africa, with services in Tanzania, Uganda, Ghana, Côte d’Ivoire and many other countries. The GSMA, an industry association, reports that sub-Saharan Africa accounts for a large share of the world’s mobile money accounts and transactions. Mobile money has also enabled savings, loans and insurance products delivered by phone.

Thinking mobile money needs smartphones

M-Pesa was designed for basic phones using simple text menus, which is why it reached so many people. It works without internet access, making it usable for people with low incomes and in rural areas.

Key takeaways

M-Pesa, launched in Kenya in 2007, lets people send money by basic mobile phone.
It spread quickly thanks to unmet needs, a large agent network and supportive regulation.
Research found it lifted about 2 percent of Kenyan households out of extreme poverty.
Mobile money has spread across Africa and enables savings, loans and insurance.