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Mastercard Funding New Mobile-Based Financial Services in Kenya (Updated)

BY Jessica McKenzie | Thursday, April 17 2014

M-Pesa: already everywhere. (Andrew Currie)

MasterCard is funding a Grameen Foundation initiative to bring financial services to the poor and the unbanked in Kenya.

AppLab Money Kenya products will be delivered through partner bank Jamii Bora. The project received additional funding from the Craig and Susan McCaw Technology for Development Challenge.

“Today around 2.5 billion people – or roughly half of the world’s adult population – lack access to credit, insurance, savings accounts, and other formal financial services. Our vision for Africa is to see cashless transactions bridge the gap for the financially disenfranchised. Our work with partners such as Grameen Foundation and Jamii Bora, with whom we share a common vision to extend financial services to the unbanked and underbanked in Kenya, will help us achieve that,” said James Wainaina, vice president of MasterCard East Africa.

While the need to provide accessible financial services to those who currently go without is laudable, why start in Kenya, home of the world's leading mobile payment system?

On the Grameen Foundation webpage for AppLab, they write of the success of M-Pesa, and the fact that none of the 130 mobile money services launched afterwards have come close to its success.

They explain:

Though many factors are at play, we think limited product offerings are a significant piece of the problem. Most MNOs [mobile network operators] offer three primary transaction types - domestic remittance, airtime top-up and bill payments. Though some MNOs have linked with banks to deliver existing products through a mobile interface, few have invested in developing new mobile products that are specifically designed to meet the needs of the poor and poorest. Even fewer telecoms and banks have the resources and capacity to conduct the research and development needed to create products for this new market segment, much less test their solutions with users, invest in supporting infrastructure and operations, and validate commercial viability.

A Brookings Institution report offers another explanation. They hypothesize that, after seeing the success of M-Pesa in Kenya, governments might be hesitant to make a friendly regulatory environment for mobile money to avoid clashes with the traditional banking sector. Also, extensive preparatory groundwork (education, advertisement, etc.) must be laid before launching a mobile money in a new market, if it is to succeed.

So, again, why is this partnership between MasterCard and the Grameen Foundation focusing on Kenya, where 43 percent of GDP passes through M-Pesa, rather than a country that has yet to see a mobile money system get on its feet?

Update: In an email to techPresident, a Grameen Foundation representative clarified that AppLab Money is not a new mobile money system. The mobile-based financial products developed by AppLab Money will be "tailored to the needs of the poor" and will be delivered in Kenya through M-Pesa. The article headline ("Does Kenya Really Need Another Mobile Money Service?") has been changed to reflect this correction.

The representative added:

It is also important to note that mobile money/payments are just the tip of the iceberg in terms of making digital money create real value for poor people. Access to mobile money doesn't mean access to a full suite of financial services. Our goal is to leverage the ubiquity of mobile money to get financial services to the "last mile".

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