Published on Africa Can End Poverty

Kenya’s telecom revolution and the impact of mobile money

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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.

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