Lessons from Kenya: mobile money and savings circles

by Rhian Lewis

Kenyans were paying with their phones a decade before the rest of us — and innovations like this have helped a whole generation become entrepreneurial and self-reliant

Everywhere you go in Kenya, you see a familiar green colour: on roadside signs, city-centre kiosks, bars and restaurants — even whole rural buildings. This isn’t just because Kenyans love green, although admittedly it is the national colour of their athletes and football team.

This green is mPesa green. If you’ve been to Kenya — even briefly — the word ‘mPesa’ needs no explanation. It is a way for people to pay each other, or to pay for goods and services, without needing either cash (in this case, Kenyan Shillings) or a bank account. The network uses the simple idea of allowing people to exchange value via mobile phone top-ups.

While the idea of mobile payments has quickly taken hold in European countries, countries like Kenya and China got off to a head start some years ago, as evidenced by a widely propagated tweet this month.

But there’s a huge difference between mobile payments in China and in East Africa: China’s payments are very centralised, all funnelling through huge multinationals such as WeChat.

While mPesa is owned by Safaricom (a subsidiary of Vofafone), the company has decentralised the buying and selling of credits, and it is this devolution of the agent network that has not only boosted the ubiquity of mPesa, but also helped foster a culture of great entrepreneurship in the country.

Toffene Kama has some interesting perspectives on this, dating back nearly two decades:

“Mobile money is so powerful because on every street there are agents who can take cash and give cash, and that’s generally what banks can’t replicate,” he explains.

As the large banks quietly withdraw their retail facilities to all but the very wealthy, closing branches and even retiring ATMs in small towns and villages throughout the US and Europe, it does not take a huge leap of imagination to see networks such as mPesa springing up in other countries.

And there are benefits beyond mere convenience: it can change the way that ordinary people view their relationship with money, or even their responsibility for themselves.

In a country like Kenya, where a state-funded safety net is all but non-existent, learning to make and save your own money is the difference between making a living and subsisting in grinding poverty.

“Some of [the agents] have dropped out of school because of necessity but they are extremely motivated and extremely smart,” says Kama.

While many people in Kenya — particularly Nairobi — work for large companies, he sees the country’s entrepreneurs and small-business owners are its lifeblood.

“Plenty of people working in the corporate world would not survive where the boda-boda driver would survive or the mPesa agent would survive. They deserve respect because … everything they earn, they earn it for themselves.”

Making and receiving payments, however, is only the tip of the iceberg. In order for businesses and individuals to grow and thrive, they need somewhere to keep their money — and also a way to raise funds to expand.

If mPesa allows business owners to take and receive payments without the need to set up a bank account or provide years worth of accounts, the local savings circles (Chamas) provide a parallel banking system where good old-fashioned peer pressure and localism promote a culture of trust.

The table banking model exists across the world, under a variety of other names, but the model is the same: people bring their savings each week, and these savings are then loaned out to the people who need it. No layers of bureaucracy or expensive bricks-and-mortar head offices are required: simply a group of motivated individuals.

Startups such as Chamapesa promise to make the book-keeping process easier for Chamas by using blockchain-like technology to record incoming and outgoing amounts in a permanent record.

Just as people use mobile phones to pay with mPesa, so they will be able to keep the records of the Chama they belong to on their phone.

Toffene Kama sees Chamas as another central pillar of Kenya’s dynamic economy, built around a culture of self-reliance and community support.

“Chamas are people who have decided not to wait for anyone,” he says.

“Chamas are a self-development movement… not waiting for a big multinational, not waiting for a centralised government.”

At a point in history where models of centralised governments and all-powerful multinationals are being questioned more than ever, it is not such a stretch of imagination to wonder what would happen if Western countries began to adopt these innovations and ideas.

For more information on Chamapesa check out the resources below:

For general discussions on Chamapesa, join the conversation on Telegram Additional articles, videos and scheduled events can be found on the website

For more information on Chamapesa check out the resources below:

  • For general discussions on Chamapesa, join the conversation on Telegram
  • Additional articles, videos and scheduled events can be found on the website

Originally published at chamapesa.com.