Mobile Payments

Ten Days in Kenya With No Cash, Only a Phone


(Corrects the comparative size of Kenya in the 10th paragraph and the interest rate of One Acre Fund loans in the 40th paragraph. )

“Taxi, sir?”

It’s often the first thing a visitor to a foreign country hears, an offer of services before he’s found his feet. It always feels like an invitation to get ripped off, and it frequently is. There’s almost no helping it.

“Taxi?” he says again, bored yet insistent. The cabbie is waiting just outside the arrivals terminal of Nairobi’s Jomo Kenyatta International Airport. Heavy-lidded eyes, thirties, a gut straining the buttons of an untucked shirt. I have bags and an expression that telegraphs clueless exhaustion. He has a car. And still I hesitate.

“Taxi?”

“Here’s the thing,” I say finally. “I need to pay with, um, ‘mobile money.’ ”

He looks at me blankly. I waggle my new cell phone. “M-pesa?”

“No problem.”

We haggle, agree on 1,700 Kenyan shillings ($19.37).

“Fine,” he says. He extends his hand and, as we shake, says, “1,750.” And with that, I enter into a contract I don’t really comprehend and am not 100 percent sure I’ll know how to complete.

I had traveled from New York to Nairobi to learn how to do exactly this—to pay for things with a phone—and to understand why Kenya has gained a reputation as the mobile payments future. Almost everyone in the country uses M-pesa (M, for mobile; pesa is payment in Swahili) to transfer money from one phone to another via encrypted short message service, or SMS. In all, there are about 18.2 million active customers in a nation twice the size of Colorado.

Despite delusions of being an early adopter, I’d never used my phone to pay for anything, not even a macchiato at Starbucks. Also, though I believe myself well-traveled, I’d never even set foot in Africa. All to the better, my editors said; there were already too many self-styled experts on how East Africa was leapfrogging more mature economies on mobile payments. My mission was more grounded: survive a 10-day tour on a phone and nothing but a phone. First, though, I needed to acquire one.
 
 
At Nairobi’s international airport, travelers deplane onto the tarmac via metal stairs, then head toward a terminal shaped very much like a concrete parking garage. This is because, until recently, it was a parking garage. (The real international airport burned to the ground last year.) Old parking spaces now serve as kiosks selling plastic-wrapped paperbacks (Lee Child, Nelson Mandela), candies (licorice, ginger chews, Tic Tacs), and a handful of mobile phones (SMS, smartphones). I splurge on a Huawei Y22-U00 running Android.

The clerks chat with each other in Sheng slang while they nimbly insert batteries and activate SIM cards and use 10-shilling coins to scratch PINs on prepaid cards for data and airtime minutes. Forget contracts, complex plans, or hardware that costs as much as a designer dog; my unhaggled airport price, including more data and minutes than I can use in 10 days, comes out to 13,000 shillings, less than $150. (In town, I could have done it for half that.) Five minutes later, I have a Kenyan phone number, and I’m a client of the country’s largest mobile provider, Safaricom.

It is Safaricom’s version of mobile money that has become common currency in Kenya. The company grew out of Kenyan Posts & Telecommunications, the former state monopoly, and has been publicly traded since 2002. It introduced M-pesa in 2007, and people now make about 80 billion shillings in monthly M-pesa transactions and move more than 130 billion shillings in and out of the mobile system via 45,000 independent agents throughout the country.

M-pesa took off almost instantly because it made it safer for Kenyans to send money home (instead of having cash carried by a cousin, say, on a bus prone to breakdowns, traffic accidents, and theft) and because M-pesa on a SIM card allowed millions of Kenyans without a bank account to become their own personal ATMs, especially appealing to farmers between harvests. If a Kenyan didn’t have a phone, she could simply borrow one; all she needed was a SIM card to be in business.

Now it’s my turn. I slide my stack of 1,000-shilling notes to the airport kiosk clerk. She presses her pink-nailed fingers to her cell phone, accessing my account, while a man tucks the bills away in a wooden drawer. Voilà! My tired old cash is now a digital balance, like airtime minutes on a phone card. My phone buzzes and dings with a personalized welcome text and account balance. I feel like a caveman who’s just been handed a Bic lighter.

The taxi driver manages a half hour of fist-shaking maneuvers between semis hauling cargo from Mombasa container ships, the riotously hand-decorated minibus taxis called Matatus, heaving delivery trucks, motorcycle taxis, luxury sedans with government plates and illegal tint windows, and the jacked four-wheel-drive vehicles favored by safari tours and nongovernmental organizations. When traffic grinds to a halt, the road fills with an army of hawkers balancing groceries, mix CDs, soccer balls, and anything else you might buy. Yes, they take M-pesa, though if the traffic begins to move, it becomes a hectic transaction.

“Nairobi traffic is crazy,” the cabbie explains. But the real traffic problems, he says, are caused by the police seeking bribes—such as the one currently directing a driver to the roadside with his steel-tipped riding crop. Usually these bribes are cash. The driver says he’s tried to pay off the cops with M-pesa—for security reasons he prefers not to carry much cash on him, and thanks to M-pesa, he doesn’t need to—but it’s not worked. “Maybe they think you’ll bring it to court,” he says. “They don’t want the evidence.”

Kago interprets while I haggle for a jacket (including, “For that price he gets no sleeves”)

But “evidence” of a transaction in the form of a digital receipt is one of mobile money’s merits and the reason I know my driver’s name and phone number and he knows mine. (Let’s call him “Geoff” so his honesty about traffic bribes doesn’t affect his job.) To settle my 1,750-shilling fare with M-pesa, we had to exchange phone numbers. Afterward we both received text receipts and full names. This makes mobile payment a personal experience compared with cash or credit—de facto networking, till death or deleted contact do we part.

“Maybe you want help with your hotel booking?” Geoff offers as we pull in front of the Stanley Hotel. “Do you want a safari? Maybe another ride? Or to meet some women?” I assure him I’ll call if I do. I have his number.
 
 
The Stanley is a storied if slightly faded 1902 colonial hotel with a formal restaurant popular with government officials and businessmen and a bar where they founded and, until 1991, based the Kenyan stock exchange. I can settle my bill with M-pesa at checkout. I find my room, drink a cold Tusker beer, and take a shower. Then my phone rings.

“How are you doing?”

“Who is this?” I ask. Only one person on earth knows my Kenyan phone number.

“It’s Geoff!” says Geoff. He wants to see whether I need another ride. Not now, thanks. Later that afternoon, Geoff calls again. We speak for a while, but it’s awkward. That doesn’t stop him from calling again that night and the next day, too. Then the texts start.

Kenyans are famous for an entrepreneurial zeal sometimes called the “Kenyan hustle.” Generally it’s admirable. Geoff’s is annoying. Perhaps this is one reason mobile payments by text haven’t caught on as quickly elsewhere. Sometimes, a cab ride is just a one-time thing.

Signs for M-pesa appear everywhere in Nairobi—in lit-up shop windows, painted on newsstands. I have little trouble making arrangements with my Safaricom account. Domestic airline ticket? Check. A traditional “meat by the pound” meal at a nyama choma joint? Yep. Coffee from Kenya AA bean sellers? Sure. Pharmacies, camera shops, and purveyors of Maasai head-bashing Rungu sticks all assure me I can use M-pesa. (And yes, the Maasai take M-pesa.) What I need, though, is a jacket so I can meet the hotel restaurant’s dress code. Can I use M-pesa to overpay the vendors selling used clothing in the open-air Toi Market?

That’s up to my new cabbie, Paul Kago. He has a fantastic sound system in his Toyota Noah minivan with a subwoofer that can clear blood clots. Kago speaks Sheng and can interpret the chitchat while I haggle for a jacket (including, “Can we sell him two?” and “For that price he gets no sleeves”). Kago and I get along. He, too, is bad at haggling in the Toi Market. (“They can tell I hate to bargain, and they take advantage,” he says.) He’s willing to try paying with M-pesa if we get pulled over by the police (we aren’t) and gamely takes on the challenge of testing the touristic limits of M-pesa acceptance in greater Nairobi. No, we can’t use M-pesa to “adopt” a rescued baby elephant at the David Sheldrick Wildlife Trust’s elephant orphanage in the Nairobi National Park, where lions and rhinos and the like roam within sight of the skyscrapers. I do, however, acquire a decent used lightweight three-button charcoal sport coat for 1,300 shillings. “Looks good,” Kago says. “You can wear it with anything.”

And it’s just as well the wildlife trust won’t let me adopt an elephant via mobile money. M-pesa has balance limits (50,000 shillings), transaction limits (no more than 70,000 shillings a day), and, most critical, limits on how much money you can deposit or withdraw (35,000 shillings). Paying for a realistic year’s upkeep for Turkwell, the orphaned tusker, would have tapped me for the day. I can as a tourist only refill my account with cash, which feels like cheating and requires walking my money through the crowds (not advised in “Nai-rob-me”) in search of an M-pesa vendor, such as the Classy Lassie nail salon. Classy Lassie has M-pesa spelled out in neon Lite-Brite pegs in the window. Beyond the stick-on fingernails and wiglets, I finally find a hall branded with the deep green M-pesa colors and a row of bulletproof teller windows.

Jambo,” says the teller.

“Jambo,” I say, using the only Swahili I know, cribbed from a Lionel Richie song.

“Your ID, please?”

Another lesson learned. Before landing in Nairobi, I’d somehow imagined M-pesa would be anonymous. In fact, deposits require positive ID and receive bank-level anti-money-laundering compliance by Safaricom—progress in a country still struggling with rampant corruption. It’s disrupting business as usual and opening things up for younger entrepreneurs.
 
 
Isaac Agina is a thin, handsome man with a marathoner’s build and a long-distance calm that belies the hustle that got him the solid concrete house with a separate bedroom. He and his wife and two children have electricity and running water, a couch and a color TV, a reliable Toyota, and a little dog that greets him like a god when he pulls up in the weedy yard at night after work. A lot of people depend upon him, and he depends a lot upon M-pesa.

Agina lives in Kisumu, on the banks of Lake Victoria. Nairobi may be the creative center of Kenya—home to “Silicon Savannah” startups and a rash of spanking new office parks and apartment buildings—and M-pesa is undeniably part of this urban scene. But to better understand what makes mobile money work so well in Kenya, I need to head to the edges. Five years ago, Agina was a math and physics teacher. He was newly married and had a goal of owning his own home in two years. As a teacher, this was impossible. “There is the first moment when you realize you are here, and alone, and you’d better make something happen,” he says.

What Agina made happen was a collective business called Kisumu Innovation Center Kenya, or KICK. It employs as many as 81 artisans making handcrafted items such as baskets, greeting cards, and other crafts for sale in European and North American fair-trade shops. “Maybe two months before Christmas—then, we have a lot of work,” Agina explains. “But people need to eat all year.” He had to help his skilled workers develop side ventures that allowed them to thrive, ideally without abandoning his business. But his employees weren’t about to apply for loans—they didn’t even have bank accounts. So Agina worked with an American-based microloan project called Kiva Zip.

The San Francisco-based nonprofit pairs small interest-free digital loans from private individuals, some as small as $25, with approved borrowers. Payback is expected; Kiva claims an almost 99 percent repayment rate. Both Kiva loans and repayment are handled digitally. Agina is a Kiva “trustee,” a trusted partner in the local community who has built up enough reputational collateral to recommend good candidates for loans, which start at 10,000 shillings and improve over time to as much as 70,000 shillings. Agina knows his role changes lives.

Outside the windows of Agina’s simple office is a dirt courtyard where KICK employees have set to their various tasks like elves in Santa’s equatorial annex. There is Milka in an apron and flip-flops troweling shredded office forms to dry as textured card paper; Patrick and William bent over a workbench scissoring flattened soda cans into fanciful bicycles and riders; and Felix in a mad-professor lab coat splattered in paint cutting wire stripped from old generators, and Fred carefully forming it into arms and legs, hands and hearts.

Now each artisan has a sideline, a hustle facilitated through loans that arrive via their mobile phones—loans they apply for, Agina vouches for, and which the artisans group collectively insures. Milka has 10 hives in a beekeeping venture with Apollo. “Bees are good,” Apollo says. “You don’t need to feed them, and they have their own security.” Patrick is raising German shepherd puppies to sell as pets and keeping dairy goats and poultry. William sells soda in the vast open-air market in town. Fred has a small barber shop. And Agina still has employees and his business.

Even farther into the country, a few miles from the Ugandan border in a town called Bungoma, I find Gertrude Wamalwa working her farm plot, a rust-colored scarf tied across her forehead and a machete in her leathered hands. Wamalwa and her Bungoma neighbors don’t appear to have any connection to mobile money. In fact, standing outside her mud and thatch home, she doesn’t seem to have much of a connection to anything mechanized, or even shoes. But mobile money is one of the tools that keeps her farm running.

Every year, Wamalwa buys seed and fertilizer on layaway, paying back the cost through a loan from an NGO called One Acre Fund. The interest rate is 17 percent, comparable with Kenyan banks, but it’s non-
compounding. Usually, paying off such a loan would involve traveling distances while carrying cash payments, or dipping into the harvest itself—selling when prices are lowest, leaving nothing for savings. That’s how farm loans have perpetuated the cycle of entrenched poverty that still plagues smallholders throughout the region. Groups such as One Acre Fund are attempting to change the equation by helping farmers pay back those necessary loans in more sustainable ways, including micropayments. Increments of just a few dollars paid regularly when those dollars are at hand make all the difference.

Wamalwa walks through neat rows of corn, beans, and millet to the banana tree sappers she planted a year and a half ago. She shades her eyes to look up at the heavy chandelier of fruit, tipped with a maroon dongle of the massive male flower. The fruit will fetch a few bucks and cover her microloan payment. Her arm makes round strokes with the machete’s 2-foot steel blade. Then, on tiptoe, she grabs the flower and pulls. The soft tree curtsies to the ground, food for cows.

Much of a One Acre Fund field officer’s time involves collecting payment in person from the 80,000 client farmers in Kenya. That involves carrying around small piles of bills. The field officers have been robbed, and fraud is always a concern. Now, instead of a weekly collection, they use M-pesa to quickly deposit money. The next step, currently in large-scale trial, allows farmers to send micropayments directly to the central One Acre Fund account.

It’s all part of a larger trend of using mobile technology and incremental payment plans to bring basic grid services to off-grid people. Companies such as Angaza Design, Off Grid Electric, Mobisol, and M-Kopa Kenya are doing this with digital microfinanced solar. Tone Kwa Tone Pata Pump (Swahili for “drop by drop gets the pump”) does something similar with farm irrigation systems; Sustainable Water & Sanitation in Africa installs M-pesa payable clean water stations.

Later that afternoon, I find Wamalwa at a roadside market. Her bananas, perhaps 40 pounds of them, lie on an ocher blanket. How much?

Wamalwa holds up five fingers. I try to bargain her down, Kenya-style. I get to 400 shillings.

“It’s a good price,” says a man.

“A fair price,” says another.

“Fine,” I say, “300.” I extend my hand. Wamalwa laughs, and from the folds of her brilliantly patterned dress, she produces a cell phone encased in plastic and rubber bands. I’m just entering her phone number into my Huawei when I hear the singsong of an incoming SMS message. It’s Geoff. Don’t I need a ride to the airport soon?

Graeber is a Bloomberg Businessweek contributor.

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