Since it launched in 2007, the service has garnered 15.1 million customers. At peak times, there are 200 transactions every second and the equivalent to 20 per cent of the country’s GDP washes through the system.

But replicating Safaricom’s success has long proved beyond reach. Since the UK’s aid agency gave a £1m grant in 2006 to try to facilitate microfinance payments, which led to the birth of the service, none of the other 120 or so copycat mobile money platforms have performed as well. Only the Philippines comes close, with about 3m customers, while Tanzania may yet overcome a sluggish start.

Check out the full article from the BeyondBrics (FT) here.

In a variant on the Kenyan model, the Indian mobile money will have to partner with a bank, meaning customers might even make interest from the money they store. In Kenya, 12-15bn shillings are stored on M-PESA systems at any one time, but Safaricom is not allowed to make a profit with the interest and neither is the customer. Instead the earnings go into a charitable M-PESA foundation. Any attempt to change this is likely to spook banks, which have in the past attempted to close down M-PESA.

In Kariobangi whave noticed that MPESA is bringing new habits and “rules of the game” in local markets and it is used by virtually 100% of market operators. However, let’s not overestimate its impact: cash is still the king, by far.

The problem is that transferring money with MPESA and withdrawing small sums from the agents requires the payments of a fee, which becomes burdensome in markets where there is a huge number of very small transactions. This, combined with the lack of interest on savings, makes MPESA a rather expensive (though handy) financial product.

For a very interesting analysis of the use of MPESA check out the recent work of Guy Stuart and Monique Cohen “Cash in, Cash out Kenya: The Role of MPESA in the lives of low income people” (PDF). They recorded over 18000 transactions with financial diaries and showed that not only cash is still king in local economies (over 94% of total transactions), but that MPESA is valuable especially for the urban-rural remittances: the “Send money home” strategy, where MPESA is an alternative to physically taking an envelope by bus over long distances.

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