Syndicate content

Kenya’s telecom revolution and the impact of mobile money

Wolfgang Fengler's picture

Our third “Kenya Economic Update” – Kenya at the Tipping Point? – notes Kenya’s strong economic recovery in 2010 reaching 4.9 percent of GDP. For 2011, we forecast growth of 5.3 percent.  The special Focus on the ICT Revolution and mobile money captures the economic momentum which is now spreading across Africa. Kenya now has 21 million phone subscribers, the vast majority connected by cell phones. With prices falling and coverage increasing, almost every Kenyan above the age of 15 will soon be connected by a mobile phone (see figure, red line).

Among the many uses of cell phones, the most innovative is mobile money—money that is stored and transferred by mobile phone. By the end of 2010, two-thirds of Kenyan above 15 years will be using mobile money (see figure 1, green line) transferring an estimated US$ 7 billion (or 20 percent of GDP). Even internet access seems to have a reached a tipping point with an expected more than 8 million subscribers (see figure, purple line), many accessing it through mobile phones. However, prices need to decline further to make Internet accessible to the majority of Kenyans. 

Figure 1 - Kenya’s ICT Revolution
 

Only Kenya has introduced mobile money on such a large scale. Michael Joseph, the outgoing CEO of Safaricom recently gave a passionate talk about Kenya’s Telecom revolution and the invention of mobile money at the World Bank in Washington, DC and credited Kenya’s regulator with allowing this innovation to happen before a full-fledged regulatory framework has been put in place.

New research by Gabriel Demombynes and Fred Owegi provides in-depth analysis of the socio-economic impacts of mobile money. Initially, mobile money was used mainly by the rich but it has now started to change the lives of average Kenyans, spreading rapidly into the middle and the bottom of the wealth pyramid. This has vastly expanded Kenyan’s access to finance (see figure).

Figure 2 – Expanding access to Finance


 
Africa is now in a position to export innovation – not just to import it.  Rest assured, it won’t be the last product Africa is innovating and exporting globally.

Comments

Submitted by Starr Hart-Meekums on
We need to read about the innovators, details of who, how, why and what's next. Individual storys create a feeling of pride in Africa a seriously important and missing element in social well being. Congradulations Kenya Starr Hart-Meekums Past resident of Kenya

Submitted by Jean-Claude M on
Kenyans deserve to be congratulated for having launched this far reaching innovation and to have adopted on large and growing scale. It is only through innovations like these that sustainable growth and development will be able to lift Africans from poverty and bring about lasting prosperity. Current technologies and ways of doing things are either not affordable to most Africans or not adapted to African environment, needs and culture. It is lso through innovations that Africans will win real respect in the eyes of the rest of the people of the world. This is a sacred mission for our young people. Let us help them achieve it. Jean-Claude

Kenya's ICT successes hold an important lesson for how the World Bank should be approaching African media. A strong and informed media is repeatedly identified in the World Bank's proposed new African strategy as a key factor in changing perceptions, in disseminating key information, and in helping ensure good governance. But, the World Bank's current support for African media is largely focused on editorial training or production grants. This does little to build real media capacity, because media with weak business models and weak financial foundations are unable to deliver the type of quality reporting, robust and independent analysis, or even geographic reach necessary to achieve meaningful impact. The World Bank's current investment into journalism training and content production grants is therefore often wasted on very limited and short-term gains -- with those journalists who acquire new skills often headhunted out of under-paid media jobs into other economic sectors. The benefits therefore quickly dissipate. A more affective strategy would be to explore ways to help the media develop better business models and more innovative products, with better returns for their owners and employees. A more profitable media would be better placed to themselves invest in quality content , in expanding their markets (by expanding both audiences and adopting innovative new platforms such as mobile) and in retaining skilled staff. A more vibrant media sector would also spark media competition, which would promote quality, diversity (including a more pluralistic approach to news coverage), and innovation. The World Bank can do this in two simple ways: [1] engage with industry-led initiatives such as the G8-endorsed African Media Initiative (AMI) to explore venture capital and other funding mechanisms for media; [2] explore ways to establish or support media innovative or technology challenge funds, to allow for rapid-prototyping, experimentation, and proof-of-concept beta testing of new approaches to news production and dissemination.

Submitted by Judith Pryor on
Thank you Wolfgang for this great article on the impact of mobile money in Kenya. It’s truly fascinating to see how Kenyans are using mobile phones to affect other aspects of their lives. The Overseas Private Investment Corporation (OPIC) recently traveled to Kenya to monitor the performance of three financial institutions whose microfinance lending is supported by the agency: Musoni, the Kenya Women’s Finance Trust, and Equity Bank. At Musoni, OPIC was able to hear directly from CEO David James about the impact mobile money and mobile banking is having on Kenyans. Since mobile banking is so accessible and so widely used, Kenyans are able to use it anytime and anywhere and can spend their time on more important matters like improving their business. Providing Kenyans with technology like this can only help increase the level of entrepreneurship and development in the country. You can read more about OPIC’s trip to Kenya here: http://www.opic.gov/blog/opic-in-action/opic-monitoring-trip-to-kenya.

Add new comment