Summary:
- Mobile money in Kenya emerged by solving a real, everyday struggle: millions were excluded from formal banking, making it hard to send, store, or protect money despite widespread mobile phone access.
- Its success hinged on learning-oriented leadership and catalytic capital, as Safaricom listened to how users actually behaved, paired early subsidy with a lightweight, scalable business model, and allowed the market to reveal the product’s true job.
- M-Pesa success required an entire ecosystem effort: the combination of invested agents and flexible regulation built a national financial infrastructure that reduced poverty, created jobs, and unlocked downstream markets.
Before mobile money existed most Kenyans were nonconsumers of formal financial services, not because they didn’t need them, but because the system didn’t work for them.
In the mid-2000s, fewer than 20% of adults had access to any type of formal financial service. Bank branches were concentrated in cities, minimum balance requirements were high, and documentation requirements excluded people earning informal or irregular incomes. For rural households, small traders, and low-wage workers, banking was distant, costly, and intimidating. This exclusion made everyday economic life slow, risky, and fragile.
Millions of urban workers needed to send small amounts of money home regularly, but there was no safe, fast, or affordable way to do so. Cash traveled through bus drivers, friends, or informal couriers which were all methods vulnerable to theft, delay, or total loss. Saving posed similar challenges. Without secure accounts, households stored cash at home, relied on rotating savings groups, or held value in livestock. These workarounds offered little protection against emergencies and made it difficult to consume, absorb life shocks, or invest in small opportunities.
At the same time however, mobile phones were spreading rapidly across income levels in Kenya. People could communicate instantly across long distances…while money still moved slowly.
Leaders willing to learn from the people
The response to this struggle did not begin with a grand plan to “bank the unbanked.” It began with leaders willing to observe, listen, and learn. While working on development-oriented telecom projects in the early 2000s, Nick Hughes noticed something striking: people were already using airtime as a proxy for money—trading it, transferring it, and converting it informally. He recognized this as a signal.
That insight found fertile ground at Safaricom under the leadership of Michael Joseph. After arriving in Kenya in 2000, Joseph took time to understand the country’s realities: an economy dominated by informal work, long distances between families, and deep mistrust of institutions that had historically excluded the poor. Instead of positioning mobile money as a sophisticated banking product, Safaricom framed it as something far more intuitive: a simple, safe way to send and store money. The system would rely not on bank branches, but on thousands of small, local agents embedded in everyday life.
What distinguished this type of leadership was not just vision, but humility and adaptability. The original pilot was designed to support microfinance loan repayments, not peer-to-peer transfers. Yet when users repurposed the system to send money to family and friends, the team listened. Leadership meant allowing the market to reveal what the innovation was actually for.
Subsidy that catalyzed sustainability
Similarly, financing followed this learning-oriented approach. Early development of M-Pesa was supported by a grant from the UK Department for International Development’s Financial Deepening Challenge Fund. The grant served as catalytic capital that absorbed early risk, allowing Safaricom and Vodafone to test an unproven idea without the pressure of immediate profitability.
Once the pilot demonstrated technical feasibility and social value, Safaricom and Vodafone reinvested commercial capital to scale the platform. M-Pesa’s cost structure was intentionally light. It required no new handset hardware and relied on existing GSM networks and simple phone interfaces. The agent network itself became a form of distributed infrastructure financing, turning local shopkeepers and airtime vendors into the operating nodes of a national payments system.
As adoption grew, small transaction fees multiplied at scale, funding reinvestment into the platform and its ecosystem. It’s important to note that long-term viability didn’t come from the initial subsidy, it happened because a solution was embedded into an everyday struggle.
Success was a group effort
Mobile money succeeded because Safaricom built far more than a product. It built an ecosystem. Instead of relying on banks, it created a new value network of independent agents. Instead of waiting for smartphones or internet access, they designed technology that worked on basic phones. And instead of operating like a bank or a charity, M-Pesa relied on a profitable business model that aligned value for users, agents, and the company itself.
Each piece reinforced the others. Agents earned income while users gained speed, safety, and reliability, meanwhile Safaricom built a sustainable business.
The government’s response was also critical. Rather than banning or prematurely regulating the innovation, the Central Bank of Kenya adopted a cautious but flexible “test-and-learn” approach. Safaricom was allowed to operate under supervision, with safeguards introduced gradually as evidence accumulated. Regulation evolved alongside the market.
By the mid-2010s, mobile money had reshaped Kenyan society. Over 80% of adults were using mobile money, making digital transactions routine. Households became more resilient to shocks and better able to rely on their social networks in times of need. Research shows that access to M-Pesa lifted approximately 194,000 households out of extreme poverty, with especially strong effects for female-headed households.
Mobile money also created new forms of employment and infrastructure. Tens of thousands of agents earned income through commissions, while entire downstream markets from digital credit to pay-as-you-go solar were built on the payments rails M-Pesa created. What began as a solution to a narrow problem became foundational infrastructure for a growing digital economy.
Seen through a market creation lens, mobile money’s success in Kenya was not the result of a single breakthrough, but the alignment of struggle, leadership, financing, and ecosystem building reminding us that markets are created not by technology alone, but by systems built for nonconsumers.
