M-Pesa
The Economics of M‐PESA1 WILLIAM JACK 2 GEORGETOWN UNIVERSITY
AND
TAVNEET SURI 3 MIT SLOAN First version: October, 2009 This version: August, 2010
We gratefully acknowledge the support and collaboration of Pauline Vaughan and Susie Lonie, and other staff of Safaricom and Vodafone. The survey whose results are reported here was commissioned by the Central Bank of Kenya, managed by Financial Sector Deepening, a Nairobi‐based NGO, and administered by the Steadman Group, a local survey firm. Thanks are extended to Peter Mwaura of the CBK, David Ferrand and Caroline Pulver of FSD, and to Carol Matiko and Moses Odhiambo of Steadman, and to seminar participants at MIT Sloan and Safaricom. 2 wgj@georgetown.edu 3 tavneet@mit.edu
1
I. Introduction
Mobile phone technology has reduced communication costs in many parts of the developing world from prohibitive levels to amounts that are, in comparison, virtually trivial. Nowhere has this transformation been as acute as in sub‐Saharan Africa, where networks of both fixed line communication and physical transportation infrastructure are often inadequate, unreliable, and dilapidated. While mobile phone calling rates remain high by world standards, the technology has allowed millions of Africans to leap‐frog the land‐line en route to 21st century connectivity. Early on in this revolution, cell phone users figured out that they could effectively transfer money across wide distances. Phone companies have long allowed individuals to purchase “air‐time” (i.e., pre‐paid cell phone credit that can be used for voice or SMS communication) and to send this credit to other users. It was a small step for the recipient user to on‐sell the received air‐time to a local broker in return for cash, or indeed for goods and services, thus effecting a
AND
TAVNEET SURI 3 MIT SLOAN First version: October, 2009 This version: August, 2010
We gratefully acknowledge the support and collaboration of Pauline Vaughan and Susie Lonie, and other staff of Safaricom and Vodafone. The survey whose results are reported here was commissioned by the Central Bank of Kenya, managed by Financial Sector Deepening, a Nairobi‐based NGO, and administered by the Steadman Group, a local survey firm. Thanks are extended to Peter Mwaura of the CBK, David Ferrand and Caroline Pulver of FSD, and to Carol Matiko and Moses Odhiambo of Steadman, and to seminar participants at MIT Sloan and Safaricom. 2 wgj@georgetown.edu 3 tavneet@mit.edu
1
I. Introduction
Mobile phone technology has reduced communication costs in many parts of the developing world from prohibitive levels to amounts that are, in comparison, virtually trivial. Nowhere has this transformation been as acute as in sub‐Saharan Africa, where networks of both fixed line communication and physical transportation infrastructure are often inadequate, unreliable, and dilapidated. While mobile phone calling rates remain high by world standards, the technology has allowed millions of Africans to leap‐frog the land‐line en route to 21st century connectivity. Early on in this revolution, cell phone users figured out that they could effectively transfer money across wide distances. Phone companies have long allowed individuals to purchase “air‐time” (i.e., pre‐paid cell phone credit that can be used for voice or SMS communication) and to send this credit to other users. It was a small step for the recipient user to on‐sell the received air‐time to a local broker in return for cash, or indeed for goods and services, thus effecting a
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