1. Mobile technologies and innovation within Sub-Saharan Africa; a case of the M-Pesa mobile payment system
Roseline Wanjiru
Newcastle Business School
Northumbria University
Newcastle upon Tyne, UK

2. Adoption of ICT in Sub-Saharan Africa
Rapid adoption
Leapfrogging existing gaps
M-Pesa an interesting case of ICT adoption in peripheral contexts
Some challenges
widespread lack of regional and national infrastructures to support reliable connectivity
challenging regulatory and policy environments
Inequality and marginalisation
Development context

3. Mobile technologies and growth
Broad academic consensus on the sources of economic growth
Capital accumulation for investment, commercial expansion from specialization and trade, scale and size effects from increases in output or population growth, and increases in the stock of human knowledge as a result of technological and institutional changes , Solow, 1957; Schumpeter 1942; Abramovitz 1993; Nelson 1995; Romer 1990).
Solow’s growth model - growth as arising from two sources; the rate of technological progress and convergence (Solow 1957).
Schumpeterian notion of creative destruction and links to African innovation
- endogenous growth
Technology transfer can lead to changes in total factor productivity, which in turn contributes to economic growth and eventually economic development
Positive relationship between a country’s output and mobile phone density ?
Caution when making predictions on African countries’ growth rates based on ICT
pre

4. Sub-Saharan Africa
Widely acknowledged challenges in the ability to attract investment into infrastructure, esp. in the four key sectors of transport, energy, water and ICT.
A World Bank study into the state of infrastructure in 24 African countries. Conclusion; poor state of electricity, roads, ICT and water infrastructure effectively reduced national economic growth by two percentage points annually, while cutting productivity by 40 percent (World Bank, 2009).
Two common challenges recognized particularly within the African ICT sectors; namely; (a) the lack of regional or national backbone infrastructure to support connectivity, and secondly (b) the challenging regulatory and policy environments that influence African countries’ ability to attract investment.

5. Connect Africa goals
Key success factors critical for African ICT development
a. The expansion of broadband backbone infrastructures and access networks, including national and regional interconnectivity initiatives, internet exchange points and rural connectivity
b). The enhancement of workforce training to engender employment and growth of the ICT sectors
c). Stimulating the development of locally relevant ICT content, services and applications
d). Developing enabling policy and regulatory environments for investment, including regional harmonization.

6. Kenya Typical low-income developing country in Sub-Saharan Africa
GNI per capita $860
Over 40% of Kenya’s estimated 44 million population of 44million are very poor, living on less than $1.25 per day, while over 60% are classed as poor, living on below $2 per day.
About a quarter of the country’s population live in urban areas while the rest are rural-based (World Bank development Indicators, 2014).

7. Kenya’s telecommunications profile:
April - June 2014
Subscriptions
Penetration
Mobile phone subscriptions
32.2 million
79.2 %
Fixed line subscriptions
201, 233
0.1%
Communications Authority of Kenya (2014)
By end 1990s, 1 in every 1000 adult Kenyans owned a mobile phone. By 2010, 90 mobile phones in every 100 Kenyan adults (World Bank 2010)
Traditional technologies remain relevant: radio still has wide coverage, with nearly 80% of the population having access to radio terminals. Two out of every five people have access to televisions (Kenya National ICT survey 2010)

8. Mobile phones in Kenya
Most popular new form of ICT within a peripheral African economy Traditional technologies such as radio still very relevant Trends in Kenyan mobile phone usage

9. M-PESA popular mobile money in Kenya
transcending simple e-payment system to wider development applications
attention linked to potential development possibilities
Insight into diverse Africa?
distinctive ways in which mobile technologies used and appropriated in peripheral, African contexts beyond dominant models informed by outsider, elite or Western priorities.
- How replicable ?

10. Some local uses of M-Pesa in Kenya
Person to person transfers: Transfers of small amounts between family, friends or for SMEs. Petty traders typically take payment via M-Pesa and can also pay customers’ change back into customers’ M-pesa account.
ATM Withdrawals: alternative access to M-Pesa funds as cash
Lipa Karo: learning institutions with M-Pesa account and a Paybill number receive school fees
Lipa na M-Pesa: walk-in customers paying over the counter for goods /services
M-Pesa Pay Bill: remote payments of electricity or water bills, loan repayments
Company Bulk payments: paying wages to workers without bank accounts into their M-Pesa accounts using a bulk payment service.
M-Pesa Safari Card: local users can load money via their M-Pesa account into a pre-payment card to make local and international transactions

12. Additional mobile products in Kenya
Providers
Mobile money
Airtime credit
Airtime sharing
Safaricom
M-Pesa
OkoaJahazi
Sambaza
Essar (Yu)
Yu-Cash
YuCredo
Share Airtime
Airtel Networks
Airtel Money
Kopa Credo Advance
Me2u
Orange Telkom
Orange Cash
Pewa
Credit transfer

13. M-Pesa and the competition
Mobile money product
Company
Mobile market share %
Year launched
M-Pesa
Safaricom
69.89
March 2007
Airtel money
Airtel Networks
15.20
November 2010
Yu-cash
EssarTelcom
8.50
December 2009
Orange money
Orange Telkom
6.37
(MobilePay)
(Tangaza)
*2014
(MobiKash) ..

14. Some insights from the M-Pesa experience so far
- Success at increasing financial inclusion of the unbanked population 2006, 2009 and 2013 FinAccess national survey results
adoption by both poor and middle classes
(potential to address exclusion; poor, rural, nomadic, gender, ethnicity)
disrupting existing industries +potential for greater innovation
potential for creative pro-poor development interventions
Local context crucial:
Existing Kenyan communication gaps arising from the widespread lack of fixed telephony infrastructure across the country,
the increased availability of cheap handsets locally.

15. Some M-Pesa impacts
2006, 2009 and 2013 FinAccess national survey results
By 2013, nearly 31% of Kenyan GDP via mobile money including Mpesa
M-Pesa users more inclined to save formally, encouraging their inclusion in formal banking.
Poor Kenyans previously largely unbanked and excluded from various economic transactions, consigned to informal, unregulated mechanisms e.g. ‘merry-go-rounds’ or rotating savings and credit associations (ROSCAs).
Increased sending and receiving transfer frequencies of smaller amounts - Morawcyznski&Pickens (2009)
Lower revenues and profits for traditional banks and money transfer companies e.g. Western Union, MoneyGram

16. Some challenges in Kenya
Kenyan mobile market – ‘winner-takes-most’ model, with significant profit inequality and extreme market shares
Proportion of market share by subscriptions: Kenyan mobile operators 2014

17. 2013 Kenya Mobile Revenue Shares

18. Further insights from M-Pesa
Regulatory capacity – intense lobbying by various interests (nods and winks), limits to CBK and CA formal regulation
FDI impacts on local economy – varied
Competition: monopoly profits vs consumer welfare
Dominance of Safaricom – Vodafone in mobile market
Limited interoperability of M-Pesa system and tight control over Safaricom Agent network (anti-competitive concerns)
Recent changes 2014 – pressure to open up system, court cases, Equity Bank+Airtel partnership
Policy and regulatory ambiguity surrounding M-Pesa
(consumer protection and regulatory proportionality)
Local context crucial in assessing applicability elsewhere

19. Developing effective mobile financial services
Supportive institutional environment, including both consumer protection and regulatory proportionality.
M-Pesa ; - regulation at the intersection between the financial and telecommunications sectors, with resulting policy uncertainty
Other factors include
market competitiveness
the end-user environment including agent and distribution networks.
Local context crucial in assessing applicability elsewhere