Using technology to improve economies A Vodafone case study
Page 5: The impact of technology on developing countries
Over the last 20 years or more, mobile telecommunications and the internet have made great leaps forward. Vodafone is a market leader in opening up access to people and information around the globe 24 hours a day. The connectivity provided by mobile phone technology supports economic development. Its impact on a developing country like Kenya has been extremely positive. Many families live in vast, remote areas of the countryside. Installing landlines over those distances is expensive and difficult.
Families are often separated as the main earners are forced to live and work in the townships in order to earn enough to keep their families. Many are self-employed small farmers or trades people such as plumbers and builders. For small businesses, better access to mobile technology means that they can advertise to a wider audience and do not have to rely for work on word-of-mouth. They can be sure that clients can contact them with ease.
Vodafone in partnership with Safaricom also recognised the need to improve the movement and security of money to allow small businesses to grow. As a solution, Vodafone set up M-PESA (literally 'mobile money') working with funding from the Financial Deepening Challenge Fund (FDCF). This is a UK fund established to aid international development. A mobile network is quick and easy to install and less expensive to run than landlines. M-PESA provides a simple, secure, low-cost money transfer system:
A customer goes to an accredited M-PESA 'top-up' shop and, in return for cash, has credit registered on their phone via the M-PESA system (rather like a pay-as-you-go top up).
The customer receives a text message to confirm the transaction. They can either store this on their phone until needed or they can forward it to someone else. When needed, the credit can be converted back into cash at any registered M-PESA agent or even via an ATM (cash) machine.
Vodafone takes a small commission on the transfer.
There are over 2,200 M-PESA registered agents in petrol stations, supermarkets and other retail bases across Kenya and five million subscribers. The service has lots of benefits. For example M-PESA has helped small businesses such as taxi drivers by enabling them to receive money for fares without having to drive around with lots of cash in their cars. The service was particularly helpful during a recent conflict in the country as it helped people to transfer money safely. M-PESA has also been used to buy everyday items, as well as to pay the rent, send funds to other people or buy phone airtime. It has even been used to pay school fees, as secondary schooling is not 'free' in Kenya. By providing safe, secure transfer of money, Vodafone's M-PESA system has:
helped small businesses become more financially secure
provided a safe way for wage earners to send money back home to their families
solved the problems of carrying around large amounts of cash.
Following these achievements in Kenya, Vodafone has extended M-PESA into other emerging markets including Tanzania and Afghanistan.