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This post concludes my report on my trip to Kenya to see M-PESA, the mobile phone--based money transfer service. Here's the full set.
Iqbal Quadir may be the original visionary of mobile phones for the masses in developing countries. In this 100-second clip from his TED talk, he tells how the vision came to him in the early 1990s:
Quadir was seized with the idea of bringing mobile phones to the poor of Bangladesh. In time, he partnered with the Grameen Bank to form GrameenPhone. And the rest is history, in Bangladesh and beyond.
This post continues my previous report on my trip to Kenya to see M-PESA, the mobile phone--based money transfer service. Here's the full set.
On our second day, last Tuesday, we flew to Kisumu, a town on Lake Victoria, that vast body of water straddling the borders between Kenya, Tanzania, and Uganda. There we met Frederik Eijkman, co-founder of a local company called PEP Intermedius. Like M-PESA itself, PEP began with microfinance, in 2004. But when M-PESA came along in 2007, Frederik and the other founder, Paul Otieno, seized the business opportunity. To launch M-PESA, Safaricom needed to quickly build a national network of M-PESA points analogous to Western Union outlets, where people could swap paper and e-money. Today PEP manages just over 100 M-PESA outlets; it owns eight and supports the rest as franchises. PEP outlets compete side-by-side with other M-PESA points.
I first learned about phone-to-phone e-money in 2006 at a conference in the basement of the International Finance Corporation. The impressions made upon me then naturally centered on the phones. In a photograph from the Philippines, a customer and a merchant stood facing on opposite sides of a display case in a food shop, each holding up a phone in order to do their bit of electronic business. Brian Richardson, creator of the phone-based bank WIZZIT in South Africa, pulled a phone out of his pocket and before our eyes, in seconds, transferred money to his wife back home. So in my mind before I went to Kenya, phone banking was electronic banking. Poor countries were leapfrogging the rich, leaving cash behind.
There is some of that going in Kenya, but in Kisumu, and in a paper by Frederik and the Gates Foundation's Ignacio Mas and Jake Kendall, I saw a far richer story.
When the now-dominant methods of microfinance were developed circa 1980, they were what economists call technological breakthroughs. Although they were low-tech in the everyday sense of the word---involving meeting in person, paying in cash, keeping records on paper---they were nevertheless new ways to extract more value from a given amount of labor and capital. Well, not all new: as usual, innovation combined old ingredients in new ways and contexts.