M-Pesa

M-Pesa: Mobile money for financial inclusion

M-Pesa is a mobile money service that lets users store, send and receive funds using a mobile phone. Launched in Kenya in 2007 by Safaricom and operating as a joint venture with Vodacom since 2020, M-Pesa expanded from Kenya to serve multiple African countries, enabling people without traditional bank accounts to access basic financial services.

Fast fact: “M” stands for mobile and “pesa” means money or payment in Swahili.

Key takeaways

• M-Pesa is a mobile-based payments and cash-management system designed to expand financial access for underbanked and unbanked populations.
• It operates through local agent outlets where users convert cash to electronic balances and vice versa.
• Transactions are authenticated by PIN and confirmed by instant SMS receipts, promoting transparency.
• M-Pesa is available in several African countries but does not operate in the United States.

How M-Pesa works

• Registration: Users register with an agent and provide government ID and required personal details.
• Deposit: At an M-Pesa agent kiosk, a user gives cash to the agent, who credits the user’s mobile account. Cash is held in a trust account.
• Transfers and payments: Users send money, pay merchants, or buy services using short codes or the service menu on a mobile phone. Each transaction requires a PIN.
• Withdrawal: Users visit an agent to convert electronic balances back into cash.
• Notifications and records: Both sender and receiver receive SMS confirmations showing names, amounts, and balances.

Example

A farmer who has no bank account sells produce and wants to store the proceeds electronically. He gives 1,000 shillings to an M-Pesa agent. The agent credits his registered mobile number’s account and the farmer immediately receives an SMS confirming the deposit and updated balance. To withdraw, the farmer visits any agent, provides his PIN, and receives cash.

Services commonly available on M-Pesa

• Cash deposits and withdrawals via agent network
• Person-to-person transfers
• Merchant and bill payments
• Airtime top-ups and other mobile services
• Transaction receipts and account balances via SMS

Benefits and special considerations

Benefits:
* Increases financial inclusion for people who lack traditional bank access
* Reduces the need to carry cash, lowering exposure to theft and robbery
* Speeds bill payments and day-to-day transactions for individuals and small businesses, including those in remote areas

Considerations:
* M-Pesa is regulated locally; registration typically requires government ID and KYC information to help deter fraud.
* Availability is country-specific; users must use agents and networks within the countries where M-Pesa operates.

Availability

M-Pesa serves several African countries (including Kenya, Tanzania, Ghana, Mozambique, Lesotho, Egypt, and the Democratic Republic of the Congo) and is not available in the United States.

Bottom line

M-Pesa is a practical, agent-driven mobile money platform that functions similarly to digital wallets like PayPal but is tailored for populations with limited bank access. By converting cash to electronic balances at widespread agent locations and using secure PIN-verified transactions with SMS receipts, it provides an accessible, transparent way for individuals and small businesses to manage payments and transfers.