It has been estimated that nearly one billion people across Africa, Asia, and Latin America do not have a bank account, but do own a cell phone - that’s nearly 14% of the world’s population that cannot access formal financial services but can send a text message. But it is also one billion possible solutions to the overwhelming lack of financial access in many developing countries.
That solution has been the marriage of mobile phones and financial transfers, known as mobile banking.
Also known as branchless banking, this new technology allows people without bank accounts to transfer money, and it is as quick and easy as sending a text message. With mobile phones currently being one of the fastest technologies to be adapted by consumers – less than 20 years to reach 80% worldwide coverage – there is a lot of potential.
And nowhere has that potential been unleashed quite like in Kenya. M-Pesa (M stands for mobile and Pesa means money in Swahili) is the first mobile banking venture to operate on a large scale, and has arguably been the most successful. Started in 2007 as a joint venture between telecom giant Vodafone and Kenya’s Safaricom, M-Pesa allows users to deposit money in an account stored on their cell phone and transfer balances to other users. Between 2007 and 2009, nearly 38% of the adult population in Kenya gained access to M-Pesa.
According to recent development theory:
“…the lack of access to finance [is a] critical mechanism for generating persistent income inequality, as well as slower growth. Financial sector policies… [that] help overcome access barriers are thus central not only to stability but also to growth, poverty reduction, and more equitable distribution of resources and capacities.” – Finance for All?
So with about 50% of the population living in poverty, this new ability to gain access to financial services could be key in helping to alleviate poverty in Kenya.
Oikocredit has recently gotten involved in mobile banking through a partnership with Samburu Teachers SACCO**. Established in 1980, Samburu SACCO was initially created to provide savings and credit to teachers, but has expanded in recent years to include other community members. The cooperative operates in the remote northern region of Kenya, where 90% of the people live on less than $2 per day.
But working in this region poses a number of challenges. The remote location and poor roads means traveling to a branch could take up to 5 hours.
“To overcome these challenges and serve its clients well, Samburu Teachers SACCO needed to be innovative in the way it does business,” said Elikanah Nganga, Oikocredit’s East Africa Capacity Building Coordinator. Upon this realization, Samburu Teachers SACCO asked Oikocredit to help support the creation of a mobile banking platform. Using Global System Mobile Communications (GSM) technology, and in cooperation with M-Pesa, SACCO is able to provide a wide range of mobile services to clients, including deposits, withdrawals, and money transfers. Clients never have to travel to a Samburu SACCO branch, but are still safely connected to their savings and credit.
Oikocredit USA will be holding a webinar on mobile banking on Friday, November 9, with Jesse Fripp, Vice President of SBI Ltd., mobile banking expert, and Oikocredit USA Board Member! Register here.
*World Bank. Global Financial Inclusion Data: The World Bank Group, 2012. Web. 23 Oct. 2012. http://datatopics.worldbank.org/financialinclusion/country/kenya
**As of October 2012, Samburu Teachers SACCO is no longer an Oikocredit project partner. Between 2005 and 2012 SACCO received loans totaling about $750,000, all of which has been successfully paid back to Oikocredit.