If you're searching for the latest in mobile technology and banking, Africa is calling: check out M-Pesa in Kenya. It's a phone system, it's a bank and it's a roaring success.
M-Pesa (pesa is the Swahili word for money) is a game-changing technology leap – a mobile money system that lets customers pay bills, send funds and borrow without getting a bank involved.
It's an example of the kind of opportunity that has investors interested in sub-Saharan Africa and has made Africa the world's fastest-growing continent in 2013.
"We launched M-Pesa in 2007," (in partnership with Vodafone co-owned Safaricom Ltd.) says Michael Joseph, director of mobile money for British telecommunications giant Vodafone Group PLC.
"Initially the object was to build customer loyalty, by enabling them to send money home. It has evolved since then to be the currency of Kenya, used in 70 per cent of all transactions. You can pay your water bill, your TV bill, take money out of an ATM."
M-Pesa works in Kenya, and has now been launched in other countries, partly because it skipped a generation of technology and financial infrastructure to go straight to its customers. In the early 2000s relatively few Kenyans had their own landline phones or bank accounts, but people were quick to acquire cellphones.
M-Pesa customers can go to stores and kiosks that sell cellular service to put their finances on their phones. They can deposit money, collect from others, even borrow microfinance loans.
"The mean transaction is about $7 or $8 (U.S.), and the cost to the customer is about 1 per cent," Mr. Joseph says.
M-Pesa's in-phone banking lets customers save and borrow as well, he adds:
"People can save as little as one cent, and then can borrow short-term money for 30 or 60 days."
The system doesn't really compete with established banks because it serves a different market. "It appealed to Kenyans who have been migrating from rural areas to big cities, arriving with no bank accounts but needing to do basic banking," Mr. Joseph says.
"It's so big that it moves approximately $1.3-billion a month just in Kenya. That may be 40 per cent of the GDP."
Advanced telecommunications and creative finance are just some of the areas that investors might want to consider when looking at sub-Saharan Africa. Consumer goods, food and beverages, transportation and environmental technology are all worth a look, too.