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Careful in your love of M-PESA and mobile payments to solve every development problem

By Wayan Vota on June 22, 2012

Do you sometimes feel that every international development organization is in love with mobile money today? That transferring currency equivalents via mobile phones will somehow be a silver bullet for many pressing issues. Why just this week, USAID and Citi Bank announced a global partnership to broaden financial inclusion and adoption of “mobile money” technology in developing countries.


Before you start to believe the hype, check out Cash In, Cash Out Kenya, a detailed report on the role of M-PESA in the lives of low-income people in Kenya. What did they find?

Taken from the transactions of 92 individuals over eight months, the study found that “cash is king.” mMoney’s share of transactions was less than 6 percent, compared to more that 94 percent for cash. M-PESA is still primarily used to send money home, usually from urban to rural, and cash out almost always happens quickly, often the same day the remittance is received. Respondents did not appear to use M-PESA as a de facto savings account, but the services was an important part of their coping strategies for unusual large expenses, particularly hospital bills.

So rather than being some magical banking solution, it is a glorified private transfer payment system from urban rich to rural poor. Now that in of itself has great value – certainly M-PESA’s adoption and usage rates are proof – but it’s not a silver bullet for international development. Nothing is.



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Written by
Wayan Vota co-founded ICTworks. He also co-founded Technology Salon, MERL Tech, ICTforAg, ICT4Djobs, ICT4Drinks, JadedAid, Kurante, OLPC News and a few other things. Opinions expressed here are his own and do not reflect the position of his employer, any of its entities, or any ICTWorks sponsor.
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2 Comments to “Careful in your love of M-PESA and mobile payments to solve every development problem”

  1. Wayan Vota says:

    Kachwanya has an interesting take on why M-PESA worked in Kenya:

    In Kenya it started as a way to send money from the urban centers to rural areas by the working class in Kenya. The tag line was simple ” send money home”. Majority of the rural folks did not understand or buy the whole concept completely but those residing on Urban centers particularly in Nairobi had a pressing need. They needed easier way to send the money back to their relatives in the rural areas having been failed by the mainstream banking system and other money transfer agencies. More from Kachwanya here

    And Tom Murphy shares a personal use case

    I can be counted as one of the enthusiastic fans of M-PESA in Kenya. It was a vital way for me to do banking while I lived in Western Kenya. Access to the nearest ATM was 30 minutes away (if road conditions were good), but M-PESA vendors were just about everywhere. So, I would withdraw money from the bank when in Kakamega and make a deposit into my M-PESA account. It allowed me to reduce unnecessary travel, reduce money spent, and allow me to essentially carry around more money without having the too much cash in hand. More from Tom here

  2. Wayan Vota says:

    The research found that access to e-payments technology alone should not be assumed to automatically have financial inclusion benefits for the poorest people. There is, however, evidence that access to formal identification gained through participation in cash transfer programmes can provide individuals with longer-term benefits including the potential for their households to access public services.

    The research also records experiences of whether there are differential or unexpected social or economic impacts of cash transfer programmes that used information and communications technology (ICT), in terms of recipients’ sense of dignity; wider impacts on traders and the local economy; communications; sharing of resources transfers; and better targeting / efficiency of transfers. Although in some of these areas the use of ICT has clear potential added benefits, the longer- term impacts of these experiences have not been properly documented, and in all cases further research is recommended.

    Lessons learned show that certain context-specific factors can contribute to the greater success of programmes using e-payments technology, namely: strong delivery partners; adequate training for all stakeholders; availability of on-the-ground support; a well-functioning payment agents network; a solid (private sector) strategy for and broader commitment to the development of emerging systems or networks; and a financial regulatory environment suited to or adapted to the realities of the humanitarian context.

    From: New Technologies in Cash Transfer Programming and Humanitarian Assistance