A Quantum Leap over High Hurdles to Financial Inclusion: The Mobile Banking Revolution in Kenya

A powerful tool to achieve equitable development is promotion of economic empowerment for marginalized citizens by increasing formal financial services access and utilization. The provision of these services via mobile phones has shown great promise in overcoming geographic, demographic, and institutional constraints to financial inclusion, especially in Africa and led by the mobile banking revolution in Kenya. This is exemplified by the extraordinary success since 2007 of Safaricom's M-PESA, a mobile phone-based money transfer, payment, and banking service: as of June 2015, Safaricom had more than 22 million M-PESA subscribers served by over 90,000 M-PESA agents. The confluence of several factors have contributed to M-PESA's success, including Kenya's political and economic context, demographics, telecommunications sector structure, lack of affordable consumer options, and enabling regulatory policies. Equally important have been Safaricom's internal astute management and marketing of M-PESA. But M-PESA is now facing a strong new rival in Airtel Money, offered by Equity Bank, Kenya's third largest bank. Now two different models for mobile financial services are competing vigorously in Kenya: Safaricom, an example of telecom-led mobile banking and Equity Bank, an example of bank-led mobile banking. There are three key challenges in Kenya to further promotion of financial inclusion via development of mobile financial services: facilitation of increased competition; transformation of non-digital microfinance institutions; and enactment of greater consumer protection. Where Kenya's success factors might be present, many of Kenya's lessons can be adapted. Where conditions are significantly different, the challenge becomes how best to nurture home-grown innovative solutions to address specific local constraints.