Judy–the Ugandan in-country coordinator for SeeeMe Institute (a Utah NGO)–is a student at a large Kampala University. When I asked her what she is doing her senior thesis on, she replied: “Mobile banking.”
Showing my age and ignorance, I immediately had visions of an armored car driving around the countryside with a teller inside. Judy laughed at this idea. Mobile banking means transferring money from one account to another using cellphones.
According to a recent article by Amanuel Mergistu in the airline magazine Selenta (Jan/Feb 2013):
Nearly 70 percent of Kenyan adults transfer money to each other via their mobile phones–the highest percentage of any country on earth–and more than $320 million dollars are transferred via Kenyan mobile phones each month. According to The Economist, this adds up to a quarter of Kenya’s GNP. As a result, cash payments are rapidly being replaced by mobile-phone payments in virtually every sector of the nation’s economy. . . .
The mobile payments revolution was birthed in 2007 by Safaricom [the largest mobile operator in Kenya], when an SMS-based money-transfer system was introduced (originally as a solution for microlending programs) and piloted in Nairobi. The application was dubbed M-Pesa (pesa is Swahili for “money”), and its usage as a simple method of money transfer spread like wildfire among Safaricom’s large user population.
M-Pesa allows users to load money onto their phones (similar to how airtime is loaded onto pre-paid phones) and then send that money to another phone through a simple text message. The introduction of M-Pesa coincided with the explosive growth of mobile phone usage across many developing countries, including Kenya. . . .
A couple of sociological reasons have been cited for why Kenya took to mobile money transfers so quickly. For one, an extremely high proportion of Kenya’s urban population helps support family members in rural parts of the country. Over the years, hand delivery and sending bundles of cash through bus drivers were the main ways to transfer funds to the countryside. With security being an issue in many areas, the introduction of M-Pesa offered a safe, cheap and convenient alternative.
Additionally, when the idea of mobile payments was introduced, the majority of Kenyans did not have access to formal financial services. With the advent of M-Pesa, any mobile phone could operate like a mini banking center.
Something very similar is happening in neighboring Uganda. Widespread use of cellphones has also given birth to this new form of banking. Just as most Ugandans moved from having no phone to owning a cellphone (skipping the landline phase), banking is moving from an individual having no bank services to mobile banking (skipping traditional banking).
I can’t wait to read Judy’s paper in June when I return to Uganda.