Let’s Educate: How ‘Mobile Money’ came into existence in Africa

3 min

Mobile Money is a mobile payments system based on accounts held by a mobile operator and accessible from subscribers’ mobile phone.

The conversion of cash into electronic value (and vice versa) happens at retail stores (or agents). All transactions are authorised and recorded in real-time using SMS.

In 2008, a Ugandan software developer named Ronald Egesa of Mobitrix Uganda Ltd was reported by the leading newspapers to have developed the country’s first mobile phone bank that he called SmartCash. It was reported to be a network independent service.

In 2009, GSMA made a grant to Safaricomto support the development of a social transfer payment project via M-Pesa. M-PESA was developed by Vodafone and first deployed by its Kenyan affiliate Safaricom.

M Pesa

Before that, due to a low rate of banking, sending money to a relative could be a big issue. As counted by Nyagaka Anyona Ouko who claims to be the innovator of this solution, the idea came as a “Eureka” moment. Knowing that most people have a mobile and one can buy airtime to another, Ouko had the idea of setting a business to barter airtime against money.

Ouko’s story starts in 2002, when he wanted to send money to his ailing mother in a remote village. Ouko faced limited methods of transferring the money and takes up the story: “The only legal way of sending money by then was through the use of Money Order or Express Money Order which were being offered by the Postal Corporation of Kenya.

However those methods required that my mother had to travel some distance to pick up the money. I also had to find time and travel to the local post office where I could do the transaction.”

He continues: “The most popular way of sending money then was by bus. However one had to hang around the bus station for buses plying the upcountry routes. I come from Gesusu village and by then Kisii District, currently Kisii County. So I could hang around and on a good day find a fellow villager whom I could entrust with the money. On some occasions of course the money never got home.”

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With this need in mind, Ouko had a “Eureka” moment and realized: “If I send to my mother some airtime, she could probably convert it to money somehow. This is because I had on occasions sent airtime before. This I could do by scratching the number, and read it to the person at the end of the line. The person could jot it down and then load it later.”

So he went on to arrange with a shopkeeper friend of him in his mother’s village that he send him some airtime then he in return gives my mother some cash. The shopkeeper agreed and only charged him a 10 % “administration” fee.


With the agreement with the shopkeeper in his mother’s village working smoothly, Ouko set out and started planning to roll out a similar method of money transfer across Kenya. The plan as he retells his story, was to have an agent in every town.

“The movement of the money was to be SMS based. The only security in the system by then was the number from which the message was coming from. So long as the agent knew the number used to send the message he went ahead and paid the money.” he said.

That’s how phones became de facto electronic wallets. Safaricom and its parent company Vodafone, who were experiencing a microfinance service pilot, could have taken notice of this and also another user experience1 and developed the M-PESA2 solution that was launched in 2007 after 2 years of development and pilot.

And soon after the massive hit into the public markets, many Telcos Companies went ahead to adapt this method and since then it has become the most convenient means of money transfer across African countries and within its confines.

Mobile money is now actively operating in over 30 countries in Africa with names like Ghana, South Africa, Ivory Coast, Nigeria, Rwanda, amongst others.

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