KENYA THE NEW SILICON VALLEY OF FINANCIAL INNOVATION

For those who may not know, the Silicon Valley in California is the hub of financial and technological innovation in the United States. The valley earned its name and great fortune as the cradle of the computer age and has never looked back since. Today, Kenya has earned its place of pride in the global technological innovation sphere through the revolutionary M-Pesa service by Safaricom. M-Pesa , a mobile money transfer service which can well pass as the innovation of the decade, has transformed lives and given most Kenyans who for years had been shunned by conventional banks a reason to walk tall. Kenya is increasingly becoming the Silicon Valley of financial innovation in Africa and the rest of the world. From its launch in 2007, the numbers of people using M-Pesa in Kenya have grown to over 9. 5 million subscribers with an average of 14,000 new registrations per day while the agent network has grown from 3,000 agents to over 27,000 agents to date. M-PESA has evolved with time and now organizations are now able to pay employee salaries using the Bulk Payment function and Mobile phone users are now able to pay for their utility bills such as electricity bills by using M-PESA. But the latest partnership between Equity Bank and Safaricom to launch the M-Kesho account has taken the mobile money innovations a notch higher, and has propelled Kenya as the financial Silicon Valley of mobile transaction novelties. The launch of the M-Kesho account by the two Kenyan companies is the perfect showcase of convergence between the mobile phone and banking, and has offered millions of Kenya who hitherto did not have a bank account the opportunity to access financial services and propagate inclusivity in critical economic activities. Indeed, mobile banking is a powerful tool that can be used to deliver financial services to millions of Kenyans who have a mobile phone but do not have a bank account due to challenges associated with accessing financial services, especially in the rural areas of the country. It is a fact that majority of Kenyans have been excluded out of the formal and informal banking services due to among other factors cost, and the distance it takes to access financial services. Just consider this. Kenya currently has over 18 million mobile phone subscribers, and growing. On the contrary, there are about 8.4 million Kenyans with bank accounts, with over 60 per cent of the population lacking access to financial services. The convergence of mobile telephony and banking has the potential of bringing over 18 million Kenyans into formal banking perhaps making Kenya the leading country in Africa with the highest number of bank accounts. This is what the new M-Kesho service has done, it offers M-Pesa users the opportunity to open and operate a bank account, save, Withdraw, access loans and micro financing and other services from the mobile phone. With the new service, Kenyans can now open a new bank account with only Ksh 100 and at no operating cost. The service is convenient, efficient, secure and available, and offers Kenyans affordable banking solutions. The new concept has also taken a notch higher the concept of branchless banking, a distribution channel strategy used for delivering financial services without relying on the brick and mortar bank branches. Equity Bank and the consultative Group to Assist the Poor (CGAP) has been at the forefront of pushing for ‘branchless banking” through the use of technology to bring more people into financial inclusivity. But perhaps the most important thing the new M-Kesho service will bring on board is to introduce a savings culture among Kenyans, by giving them the opportunity to save and borrow money without necessarily visiting a bank and knowing their savings are secure with deposit protection insurance. Millions of Kenyans have been locked out of the formal banking and financial system, and therefore do not have the opportunity to save money and borrow in a bid to improve their standards of living. They can never be allocated financial resources because they are not part of the financial system. The launch of M-Kesho means that these Kenyans will now sit on the table where financial resources are allocated as they move into the formal banking sector. Savings is a key tenet of Vision 2030- Kenya’s economic blueprint which hopes to propel Kenyan into a middle-level income country enjoying high standards of living by the year 2030. If Kenya is to attain the goals of Vision 2030, and move away from the vicious cycle of poverty, a savings culture especially in the informal and microfinance sectors must be encouraged. Savings will enable people to borrow money which they can then use to better their lives, and ultimately help bridge the gap between the rich and the poor as more funds will be released for investment. The conversion of the M-Pesa service into a bank account will not only promote a culture of savings, but will bring in more “unbanked” Kenyans into formal banking, but will also make Kenya meet its target of 25 per cent savings to the Gross Domestic Product of the country. With the launch of the new service, Kenya is now a compelling example of how the transformational force of technology can be used to improve the lives of the people.
The writer is the Managing Director & CEO of Equity Bank