How mobile money is creating virtual infrastructure in Africa

One thing I learned from Somaliland, where people began building peace in the 1990s after years of terrible conflict, is that absence can be a good thing. Let me explain….

Hargeisa had very few telephones, because it had very few telephone poles. And it had very few telephone poles because Somalia’s former dictator Said-Barre wanted to both punish people who lived in Somaliland and make communication difficult for them.

So early on, after Somaliland decided to take back its independence from Somalia and become its own state once again, a huge amount of ingenuity sprouted there. And they began to create a virtual infrastructure – mobile phones rather than telephone poles.

By kalsantv –, Public Domain,

For one entrepreneur, the absence of telephone poles was a good thing because it meant people were keen on mobile phones; he created a company to sell them. Getting money to Somaliland was a clunky process in the early 1990s and there was no easy way to do it. So another brilliant entrepreneur, recognizing that money from the diaspora was keeping the country afloat, created a money transfer company that made such transfers easy and thus rapidly flourished.

People created the government themselves and so the government and NGOs and communities saw needs and felt free to go ahead and meet them. The first hotel in Hargeisa was created by a man who heard on the radio about people coming for meetings but having nowhere to stay; the first university was created with funds from people working in the Middle Eastern oil fields who wanted a future for their children.

One of the world’s most innovative ideas – mobile money – similarly came from the absence of banks in much of Africa. To get money from one place to another before M-Pesa, people used a variety of strategies. They might send money by bus or matatu driver, for example. Jan Chipchase, a Nokia researcher, was intrigued to learn that one way people sent money in Uganda was to buy SIM cards, text the number to a relative in the village, who would sell it to the local ‘phone kiosk operator’ to use in her business, and thus get their money. Effectively, it brought rudimentary banking to areas where there were no banks, and – unlike enterprises like Grameen Phones,  it was self-directed – ‘street-up’ innovation, Chipchase calls it.

This is the kind of ‘frugal invention’ that is so common in Africa because there is such a lack of infrastructure of all kinds. What fascinates me is that these ideas also have caught on in North America, where we don’t realize they came first from Africa – lots of my students couldn’t imagine ‘mobile money’ being first developed in Kenya.

It is the result of the same kind of careful observation to which Zimbabwean architect Mick Pearce credits many of his building techniques, but in this case, it’s close observation of peoples’ behaviour rather than nature.

And not only does it create new ways to do things – it creates a new kind of infrastructure that is effectively virtual. People were creating their own banking system where there was none by monetizing SIM cards, and soon after M-Pesa launched in Kenya in 2007, it became clear that mobile money was creating a virtual banking system that didn’t need bricks and mortar bank branches and that was as accessible in small villages as in big cities.

By Rosenfeld Media –, CC BY 2.0,

“Within eight months of its inception in March 2007, over 1.1 million Kenyans had registered to use M-Pesa, and over US$87 million had been transferred over the system,” a 2011 study found. “By September 2009, over 8.5 million Kenyans had registered to use the service and US$3.7 billion (equivalent to 10 percent of Kenya’s GDP) had been transferred over the system since inception. This explosive growth was also mirrored in the growth of M-Pesa agents (or service locations), which grew to over 18,000 locations by April 2010, from a base of approximately 450 in mid-2007. By contrast, Kenya has only 491 bank branches, 500 postbank branches, and 352 ATMs.” 

In 2015, M-Pesa was used to transact $28b worth of transactions, equivalent to 44% of Kenya’s GDP. Some years ago, I read a BBC story quoting a woman in a small village who said mobile money had been the most powerful form of democracy the country had ever seen.

In 2017, CNN reported on M-Pesa’s 10th anniversary. “M-Pesa — “pesa” means “money” in Swahili — has made a dramatic impact over this time. The system was launched by Vodafone’s Safaricom mobile operator in 2007 as a simple method of texting small payments between users. Today there are 30 million users in 10 countries and a range of services including international transfers, loans, and health provision. The system processed around 6 billion transactions in 2016 at a peak rate of 529 per second.”

It has spread around the world since then, and – based on careful observation of peoples’ behaviour – has added ways to allow people to save money and pay small loans.

The visionary man who created M-Pesa in 2004, Nick Hughes, has since moved on to explore other useful applications of mobile connectivity. The London Business School tells the story this way:

“By 2009, as M-Pesa was attracting widespread praise in global media, Hughes had moved on to the next challenge: “I was already starting to think that a payment itself eventually becomes a commodity. Make the assumption that anybody can do a transaction at low cost and send money between two points, no matter how far away they are, then what else can you do with that?”

“The answer was M-KOPA (“kopa” is Kiswahili for “borrowed”). Hughes noticed that M-Pesa customers spent regular small amounts on fuel, such as kerosene and charcoal. He also knew the economics of solar energy were changing quickly, with photovoltaic panels and lithium batteries becoming affordable.

“Never a hostage to established business models, he and his team re-imagined the outcome for millions of Africans who were using kerosene lamps for daily lighting and cooking: “If someone has connectivity and can do a small transaction, why don’t I try to solve the problem where that person is spending 50 cents a day on kerosene and use that small daily payment instead to access clean energy and acquire an asset at the same time?” he thought. “With smart technology and digital payments, there is absolutely no need for them to keep using kerosene.””

By 2018, M-Kopa had connected over 600,000 homes to affordable solar power and 500 new homes were being added everyday, says one profile. “M-KOPA customers will make projected savings of US$ 450M over the next four years, experiencing 75 million hours of kerosene-free lighting per month.”

Again, Hughes has not just created a new product – he has helped establish a new kind of infrastructure in a place where power can be a scarce commodity, and done it in a way that contributes to protecting the natural environment by reducing the use of polluting kerosene.

“M-KOPA pioneered and kick-started the wider pay-as-you-go (PAYG) solar market. The concept for our business model was first sketched out by our founders on a whiteboard in early 2010. Our idea was to combine the power of digital micropayments with IoT (Internet-of-Things) connectivity to make financing more accessible, and solar was just the start.” 

Says the award-winning company: “Since then, we have built one of the world’s most advanced connected asset financing platforms. We have used it to provide nearly $400 million in financing that has enabled 1 million customers to access solar lighting, energy-efficient televisions and fridges, smartphones, cash loans, and more.”

Awarding the company’s innovation in 2018, Fast Company noted that “M-Kopa Solar’s motto is “Power for Everyone,” and its accessible units are bringing power to areas that have long been overlooked.”


Changemakers – Nick Hughes. London Business School.

Founder Story: Meet Nick Hughes, founder of African mobile money giant, M-Pesa, and clean energy provider, M-Kopa Solar. London Business School.

Mobile banking – the impact of M-Pesa in Kenya. Isaac Mbiti and David N. Weil.

M-Pesa: Kenya’s mobile money success story turns 10. CNN.

M-Pesa has completely transformed Kenya’s economy, this is how….CNBC


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