Switch on your mobile phone and make cash

• Safaricom is partnering with Equity Bank to put bank accounts in the hands of mobile phone users.
• Kenya becomes first country in the world to introduce financial transactions system that does not involve a card.

A silent revolution is taking shape in the mobile phone and banking sectors — and the biggest beneficiaries are likely to be low income earners and rural area residents.

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The first sign of change came when Equity Bank launched its mobile phone banking system known as Eazzy 24/7 in English or Benki Yako Mkononi in Kiswahili.

This was a major breakthrough for the bank, although the system is already being tested in Asia by Grameen Solutions. For those who may have forgotten, Grameen won a Nobel Peace Prize some time back because it gave credit to the poorest of the poor in Asia — including beggars.

On August 3, Felix Salmon reported in his blog, Portfolio.com, that a leading mobile phone company in Asia, Obopay, had announced an alliance with Grameen Solutions. “In ten years time, the companies said, they would like to see one billion of the world’s poor… receive banking services via their mobile phones”.

One month later, Equity announced that it would provide banking services for both Safaricom and Zain subscribers. With that one stroke, the bank staked a claim to the more than 11 million mobile phone users in the country.

Of these, only about 4.5 million have bank accounts, which means, another six million people have the chance to sign up and get access to banking services, including credit. The bank has vindicated a research conducted by two World Bank scholars, Lynn Bennett and Carlos Cuevas.

According to the two, the large number of people who have been ignored by banks because they are poor or because they live in remote areas represent “a large and potentially profitable market for institutions that can develop ways to reduce the cost and risk of serving them”.

From anecdotal evidence, Equity Bank is not just good at giving credit to anyone who needs it, including students who want to try their luck at the Nairobi Stock Exchange; it is also very efficient at ensuring that the borrowers do not default.

Informal sector

One of the challenges that have been facing businessmen and workers in the informal sector and farmers in rural areas is the unpredictability of their income. For instance, when a maize farmer sells her produce in December, she has to wait until some time in June before she can make some more money from the sale of beans, potatoes and peas. In between, her income is not assured. But with a bank in her hand, she can save some money in the high season to spend in the low season. By virtue of her savings, she will have attained some degree of economic security.

With this, the World Bank scholars say, she and other people in the Jua Kali or small scale farming sectors will have access to credit that can help them out of poverty “by improving the productivity of their enterprises or creating new sources of livelihood”.

The second revolution witnessed in the last week was the decision by Safaricom and PesaPoint to enter into a partnership that will allow Safaricom subscribers to withdraw money from PesaPoint ATMs. The most significant impact of this partnership is that it allows customers to withdraw their money without having to use an ATM card. With that, Kenya became the first country in the world to introduce a system of financial transactions that does not involve a card.

The potential for this service to revolutionise the money transfer business is enormous, considering that already, Safaricom is partnering with Equity to put bank accounts in the hands of mobile phone users.

The revolution

The third phase of the revolution came on Thursday when Zain, formerly known as Celtel, announced that it would spend Sh3 billion to expand its network services in rural areas over the next three months.