THE FUTURE IS HERE

Last week Kenya telecom company, Safaricom and Equity Bank launched a service, M-Kesho. The service will make it possible for Safaricom’s mobile money clients directly access their Equity bank accounts.

Safaricom’s M-Pesa service has been lauded high and wide, being the first of its kind anywhere, and since its inception almost four years ago has roped in 9.5 million clients. This is significant because now M-Pesa subscribers total more than all bank account holders in Kenya, making Safaricom a major player in the financial industry.

Coming together with Equity Bank is arguably a game changing move, because the bank in its own right, is the biggest bank in Kenya by number of account holders.

To understand the full implication of this development we need to understand how M-Pesa works.

Just like similar mobile money transfer services in Uganda, a subscriber would walk over to an M-Pesa agent and deposit money on his phone. The subscriber would then be able to send this money to another mobile phone owner or buy goods from selected agents.

With M-Kesho the need to go to the agent will be removed. Dealing with the mobile phone one can now transfer money from their bank account directly to the intended recipient.

Beyond money transferring M-Kesho will provide interest bearing accounts, issue credit and write life insurance.

The immediate implication of this is that Safaricom’s 15 million subscribers now have bank accounts, with all the attendant benefits that come with it.

Up to this point most Kenyan bank account holders were urban dwellers, with Safaricom’s extensive rural network hundreds of thousands of Kenyans will have easier access to financial services.

The benefits of joining the formal financial sector can not be underestimated for individual or country.

We need not look far back into history to find a time when having a bank account was a a privilege and a thing of pride. Banks erected barriers to account holding with prohibitive account opening requirements, high minimum balances and unrealistic loan requirements.

With technological advancement and increased competition thousands more Ugandans now have bank accounts and access to credit is more widespread.

The numbers do not lie. Since 2000 after our own banking crisis, savings and loans in the banking sector have jumped more than five times to sh4,256b and sh4,083b respectively as at the end of February.

The benefits are there for all to see with the real estate development boom, businesses opening at every street corner and the collapse of the road system under the weight of the thousands on new cars making their way onto our roads annually. But this only happens in Kampala.

By merging financial services and telecommunications, the barriers to entry into the formal financial sector are will be further lowered and it is expected that the ensuing benefits will be much better spread around the country.

The advancement of individual players inevitably feeds into the national economy.

In the most important way that I can think of with more players entering the formal economy more of our little monies will be aggregated into meaningful sums that can drive meaningful change.

One of the biggest challenges of development is to drive up savings rates. Because savings fuel investment, which in turn grow economies and raise incomes and wealth.

So far Uganda is doing badly, with its savings rates far below regional averages making us reliant on moody donors to finance our crucial investments in infrastructure.

No country in the history of world development has developed without mobilizing its own resources. And it makes sense that with your own resources you can determine your own priorities and dictate your own development agenda.

The explosion of telecommunications on the continent over the last 20 years has provided the missing link for us to mobilize our resources. Out next challenge of course is learning how to deploy these same resources to extract maximum gain for our people.

But the collaboration of Safaricom and Equity bank – arguably the most innovative companies in their respective industries regionally, is a taste of things to come and an announcement that the future is here.


Published May 2010, New Vision