July 23, 2015 Print

As President Barack Obama heads to Nairobi for the Global Entrepreneurship Summit this week, much of the reporting has focused on the significance of Obama returning to his father's homeland. This misses the truly exciting news — the way in which free markets and free enterprise are improving the lives of millions of Africans. Atlas Network’s Kenyan partner, Eastern Africa Policy Centre, is releasing videos timed to coincide with Obama’s visit that demonstrate how Kenya's future will be built by a citizenry now engaged in the global marketplace. Its first video focuses on the broad adoption of M-Pesa, a mobile payment system that runs on cell phones, used by an estimated 58 percent of Kenyan adults.

Transaction costs can be a significant drag on developing economies, but this innovative new technology is changing that for Kenyans. M-Pesa, launched by Safaricom and Vodaphone, allows the instantaneous transfer of funds between customers and the providers of goods and services — transactions that used to take hours or even days to clear. M-Pesa lowers the costs of trade, making economic activity faster and far more cost-effective.

“The implementation of mobile money has created huge productivity,” said Dr. Bitange Ndemo, who is professor of entrepreneurship at the University of Nairobi’s business school and a former government official who worked on the implementation of M-Pesa. “We used to send money through postal services, and it used to take four days. If it’s a patient who has been discharged from hospital, that patient will be detained in hospital for four days, and the bill accumulates. But today, somebody tells you somebody has been discharged, it takes one minute and that patient is out. You see how much amount of money you have saved, or how much more productive the economy has become.”

M-Pesa makes it possible for nearly anyone to open an entrepreneurial business in Kenya, accepting reliable payments in seconds and ordering supplies to be delivered rather than making time- and cost-intensive personal journeys. One musician interviewed for the Eastern Africa Policy Centre’s video explains how M-Pesa allows people in other cities to order CDs of her music, which she then couriers by bus to her customers.

Initially launched in 2007, M-Pesa had reached 17 million subscribers only four years later. CapX reports that Kenya’s M-Pesa transactions in 2014 amounted to “almost half the value of the country’s GDP.” Other countries that have begun using M-Pesa include Tanzania, Afghanistan, South Africa, India, and Eastern Europe.

“It’s a revolutionary product that has changed the lives of Kenyans,” said Mike Rotich, executive director of the Eastern Africa Policy Center. “I believe there’s no household that you can go in Kenya that doesn’t know what M-Pesa is.”

Watch “M-Pesa lowers transaction costs, sparks entrepreneurship in Kenya.”

Read “The magic of the African mobile revolution.”