Why fintech is critical to driving Africa’s recovery

By Sitoyo Lopokoiyit, CEO, M-PESA Africa

Financial technology (fintech) has had a transformative impact on the lives of people and their businesses in Africa. Platforms like M-PESA have brought digital financial services to many for the first time. But the role we play as a leading fintech company must now evolve – our focus must shift towards improving financial health, enabling businesses to build back stronger and supporting Africa’s economic recovery.

I remember the last time I needed an envelope and a bus courier to send money home to my family in Kapenguria, more than 400 kilometres north of Nairobi, Kenya. It was an eight-hour drive, and my mum would have a long walk to the station before she could collect it. The year was 2007, and this was a common occurrence for workers like me living in the capital city.

Kenyans would send money home on long bus journeys from Nairobi

But then M-PESA, a mobile money platform launched by Vodafone and Safaricom, changed it all for us. For the first time, it was possible for Kenyans to transfer money to one another through their mobile phones. And we have not looked back.

M-PESA brought financial services to many Africans for the first time

M-PESA has since grown to become Africa’s leading fintech platform, connecting over 48 million consumers and 450,000 businesses with a full roster of digital financial services in Kenya, Tanzania, Mozambique, Lesotho, Democratic Republic of Congo, and in Ghana and Egypt where it operates as Vodafone Cash.

In my 10 years at Safaricom and M-PESA, I have seen first-hand how the platform has been a key driver of financial inclusion in Africa, helping reduce poverty and creating opportunities for consumers to improve their lives or grow their businesses.

We believe there is an opportunity to reach 50 million people and their families across the continent with digital financial services by 2025. But the work doesn’t stop with financial inclusion.

Our focus is shifting towards supporting people with their financial health. Over the last year, many people have seen their financial circumstances severely impacted by the coronavirus crisis. A report by the Africa Union suggests almost 20 million jobs are at risk, with youth unemployment twice the level of older adults, while many people have no savings or are struggling to keep their businesses afloat.

M-PESA can play a crucial role in helping society get back to strength and ultimately growth beyond the crisis.

Enabling businesses to thrive

Micro, small and medium size businesses play a major role in the economies of African countries, as do large corporates. But many of those businesses face similar challenges when it comes to collecting payments, and that can deter entrepreneurs from starting in the first place.

Pick-up Mtaani, a start-up using M-PESA to help solve Kenya’s e-commerce delivery challenge

The issue with the traditional banking and card payments system in Africa is speed.

Card payments take time to process – in some cases, a business could be waiting weeks before a payment reaches their account. That can cause cash-flow problems, particularly for small businesses, and make it difficult to operate.

Transactions through M-PESA, on the other hand, are instant. And all a business needs to access M-PESA is a SIM card.

Businesses in Africa can also use M-PESA to simplify payments to suppliers, pay staff salaries and utility bills, access short term loans and more.

M-PESA has helped Pauline Kinja build a successful grocery delivery business

But the next challenge for businesses is growth. Our focus is shifting to help businesses achieve that – through M-PESA, we’re starting to provide money management education and business training, for example. For every dollar our business customers collect as payments on M-PESA we want to provide them with solutions to generate an extra five.

The future of M-PESA – an open door for innovation

We know we have the scale and expertise to continue transforming the financial services sector in Africa. But the wider business, financial and technology sectors are also booming with ideas and innovation.

We want the international business community to feel confident in building their own products and services for customers in Africa without worrying about the payment channel. Today, we have around 29,000 developers building products connected to the M-PESA platform.

African consumers are accessing new services through M-PESA

Our aim is to push this further, connecting with major international players in the e-commerce and entertainment sectors – both markets have boomed in Kenya during the pandemic, and this growth looks set to continue.

We are also open to collaborating with other fintechs, sharing ideas and developing our platforms for the greater benefit of society.

M-PESA is a company driven by our purpose to improve lives through access to digital financial services. Our success is dependent on the successes of society and those around us.