NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The US Senate Chambers. A corporate board meeting. A new car.

Three seemingly random sentence fragments – right? Not to me.

These all share something in common – all are supposed to be grand, life-changing or at least out of the ordinary. Yet when you see the US Senate Chambers on an average day, they are half empty, mostly procedural and somewhat dispiriting for those political science majors out there (myself included).

A corporate board meeting, similarly, is nothing short of average. Under informed directors, over stressed presenters and all too often, dubious decision making. Average, or worse, if you ask me.

And while a new car may retain its smell for a few days, after a week, it just feels normal to drive.

So what does this have to do with me, and my travels in Kenya? Since its introduction in 2006, I have been obsessing over an innovative little cell phone service called M-PESA. Launched by Safaricom – Vodafone’s subsidiary in East Africa – the M-PESA service allows Safaricom customers to transfer phone credit wirelessly, through SMS.

Here’s a longer description of how it works – simply put, you SMS 100 shillings and a special code to your friend’s phone, and he will receive 100 shillings of credit. What’s more, you can link up with a bank or a merchant to withdraw that credit as cash.

It’s pretty revolutionary, because it allows anyone with a mobile phone to have a way to store cash, and transfer money. For most who live at the bottom of the economic pyramid, M-PESA is close as one gets to a bank account – which we in the west tend to take for granted. I remember when M-PESA was launched; I wrote about it on NextBillion at the time, and updated readers regularly on the service’s progress. I was definitely an M-PESA geek – I thought the service was amazing.

Fast forward to this past Sunday. I am in the Gigiri section of Nairobi, an upscale, leafy neighborhood home to many embassies, constabularies, consulates and UN offices. Every weekend, a dedicated group of ultimate Frisbee players gather on a field inside the UN complex for a spirited, fast-paced game. An avid ultimate player myself, I jumped at the opportunity to play some disc in a new city – especially when it’s about 35 degrees back in New York right now!

Towards the end of the game, I asked around – was anyone going towards the south side of town, where I am staying? “Sorry, no man – we live around here.” “Dude, next week, I’m going that way – but not tonight.” Etc. Simple, and no worries, I thought – I’ll just call the same taxi that took me up here. He can come pick me up and what’s more, he already knows where I am.

Imagine my chagrin – and embarrassment – when I attempted to call the cab and got an error message on my phone: “You have insufficient funds to perform this action.” Oh no, I thought – I was going to have to ask one of these very nice strangers to use their phone for a minute. Not too big a deal, but embarrassing nonetheless – especially when you’re the new guy.

I turned to my right, where Mike – an Australian journalist and a helluva ultimate player – was drinking some water.

“Hey Mike,” I asked, “Could I borrow your phone a sec? I’m ashamed to admit it, but I’ve run out of credit on my phone.”

“Uh, sure.” Mike hesitated. “Do you have Safaricom, by chance?”

“Uh, yes.” This time, I hesitated. “Why?”

“Well mate, I can M-PESA you some credit, if you want.”

Lightbulbs! Soaring, orchestral music! Fireworks! I WAS ABOUT TO USE M-PESA. I could hardly contain my excitement, humongous bottom-of-the-pyramid nerd that I am. I tried to look cool. I think I failed, if Mike’s raised eyebrows were any indication. Anyway, I gave Mike 100 KSH (about $1.33) and he sent me a SMS – next thing I knew, I had the cab on the way and a new experience under my belt.

Having known of M-PESA for years, I never thought my first experience with it would be so, well…mundane. But that’s my point. Just like the Senate, or a board meeting or a new car, this thing that I had held in such high esteem for so long had turned out to be rather ordinary. On the other hand, that’s the beauty of it – M-PESA is so simple (and profitable for Safaricom, to boot) that it is used by millions a day here in Kenya, and is being rolled out across East and Southern Africa.

And, to its credit, M-PESA got me home that night – can’t say THAT for the US Senate, now can you!?

Interested in learning more? Check out this great article on M-PESA from MIT News detailing research conducted by Tavneet Suri and William Jack on the types of M-PESA transactions taking place in Kenya.

M-PESA is also being used by Bridge International Academies, a franchise-like network of low-cost, for-profit private schools. Rather than deal with the hassles of payables and receivables, Bridge International’s parents simply send school fees to the company via M-PESA – which keeps costs and delinquiencies down for the company and makes it easy on the parents.

Be sure to read Nathan’s interview with Frontline:SMS’s Ben Lyon, which digs deeper into the mobile money and mobile transfer issues.