M-Pesa

Definition

m-Pesa is a mobile money transfer service that originated in Kenya, allowing users to send and receive money using their mobile phones without needing a traditional bank account. This innovation has revolutionized financial access and has played a significant role in enhancing the economic landscape of many African nations, making it a key example of how technology can foster financial inclusion.

5 Must Know Facts For Your Next Test

1. Launched in 2007 by Safaricom, m-Pesa has grown to serve millions of users in Kenya and other countries across Africa.
2. m-Pesa allows users to perform various transactions, including money transfers, bill payments, and savings, directly from their mobile phones.
3. The platform has significantly reduced the cost of sending money and has improved access to financial services for people in rural and underserved areas.
4. m-Pesa has inspired similar mobile money services in other countries, showcasing the potential of technology to bridge the financial gap.
5. Studies show that m-Pesa has contributed to economic growth in Kenya by increasing household incomes and enabling small businesses to thrive.

Review Questions

• How does m-Pesa enhance financial inclusion for individuals without access to traditional banking?
  • m-Pesa enhances financial inclusion by providing a secure and accessible platform for individuals who may not have traditional bank accounts. It allows users to perform essential financial transactions such as sending money, receiving payments, and managing savings directly through their mobile phones. This is particularly beneficial for people living in rural areas where banking infrastructure is limited, empowering them to participate in the economy more actively.
• What are the key features of m-Pesa that differentiate it from traditional banking services?
  • Key features of m-Pesa that set it apart from traditional banking include its accessibility via mobile phones, low transaction fees, and the lack of requirements for formal identification or bank accounts. Users can easily register for the service, allowing even those without formal banking access to engage in financial activities. Additionally, the extensive agent network facilitates cash-in and cash-out services, making it convenient for users to manage their money.
• Evaluate the impact of m-Pesa on small businesses in Kenya and how it has influenced economic development.
  • m-Pesa has had a transformative impact on small businesses in Kenya by providing an efficient way for entrepreneurs to receive payments and conduct transactions. This ease of use has enabled small businesses to expand their customer base beyond local markets and improve cash flow management. As a result, m-Pesa has significantly influenced economic development by fostering entrepreneurship, increasing household incomes, and promoting greater economic participation among marginalized groups.

Related terms

Mobile Banking: A service that allows customers to conduct financial transactions remotely using a mobile device.

Financial Inclusion: The process of ensuring access to appropriate financial products and services for all individuals and businesses.

Agent Network: A network of local agents or vendors who facilitate mobile money transactions on behalf of service providers, often serving as cash-in and cash-out points.