Revisiting the Beginnings of M-Pesa

In March 2006, I resigned from British American Tobacco (BAT) to head into a new job in a new industry (as a product assurance analyst at Safaricom Ltd, the leading telco in Kenya).  This was after having applied for different positions at Safaricom for what seemed like a million times. Then, as now, securing a position at Safaricom was pretty much a dream-come-true for a recent graduate. After a few days of vacation, I found myself at Safaricom, wearing an ill-fitting suit, a heavily starched shirt and an even more uncomfortable tie.  The second day on the job was most trying. I was sent to a project meeting where the agenda was launch of an international gateway. For somebody who had just come from manufacturing industry, international gateways, points of presence, spectrum, bandwidth, throughput, transit, carrier services all sounded so strange. I could recall some concepts from my undergraduate studies but hardly enough. In other meetings there were of course the usual acronyms that color the telco parlance – MSISDN, IMSI, HLR, LCR, UAT, SIT (nice pillow talk for those who have spent time in telco but horror story for a newbie). I knew I had either made a very good decision and the rest of my life would be extremely interesting or I had made the biggest blunder. My bets were, of course, on the second scenario. Confusion increased with each additional meeting I attended and I was sure I should have stuck to selling cancer sticks. I mean, a cigarette is a cigarette by any other name and smokers who are craving their nicotine dose do not have the patience for acronyms – I have no proof but I suspect this is what keeps the tobacco industry fairly straight-forward.

Things only got worse. Product assurance analysts were supposed to perform risk assessments as part of pre-launch procedures for all products.  A new product was coming. M-PESA. It was a product that few people in the company believed in especially during much of its pilot phase in 2006 before launching in 2007. It was highly experimental, sounded very much like the stuff of dreams, very much the kind of thing that folks like Nick Hughes and Susie Lonie, seated in nice air-conditioned Vodafone offices in London, would be toying with but hardly something that would work.  Transfer money through a phone? In Kenya? Seriously? Why would anybody ever want to do that? Who would even trust such a service? The rest of the risk management team was busy with more important and “realistic” products (e.g. VoIP, bundles and Missed Call Alert).  How unlucky could one get to be assigned this product? It would seem I had wronged my ancestors in a big way. As if joining a crazy industry was not enough, here was a crazy product.

For M-PESA, there was no precedence to this kind of product, no data to analyze and no graphs that we could plot. The entire business proposition was shaky. My line manager (Alfred Kiteme, now Director of Business Assurance at Etisalat Afghanistan) and I were stuck, trying to think of the risks around this thing. Alfred had an idea. Since we do not have all the info (ahem, we had nothing), why don’t we just talk to as many people as possible and ask them what they foresee as the things that may go wrong? It is possible that people (at least the ones who hang around after scoffing) will tell us stuff that we would never think of, by ourselves. My bewildered self was only too willing to give this a try.

That is how we found ourselves in Nairobi CBD, taking to a number of Safaricom GSM dealers – these dealers would now start being the main M-Pesa agents. We walked into one dealership and the lady told us that she was sure the product would do well, as long as the dealers were making money from it. She paused, sipped her tea, contentedly and gave us a stern look. She repeated, “as long as dealers are making money from it”.

Close to 7 years later, whenever I walk into an M-PESA dealer shop (and trust me, Nairobi is full of M-PESA dealerships), I remember that lady’s words. We can have the most innovative ideas and the grandest of dreams, the most elaborate plans on how we shall execute and we can spend all the time thinking of the risks and mitigations. Ultimately, we are all in the business of partnership. It’s a scratch-my-back-I-scratch-your-back type of world.  Well, truth be told, I still remember that the good lady did not offer us tea (!) but that’s fine. I am sure now that she is making money, if I passed by her office, she would offer me some tea.

Perhaps one of the fundamental questions that telcos should ask is: even if this is going to be great for my customers, is it going to make me money and is it going to make money for my partners. So basic, yet so ignored. I use “money” here loosely. What the partners want to know is how “it” advances their business.

We all know the story. M-PESA has become a roaring success – bagging close to 20 local and international accolades within a period of 5 years. By Mar 2012 Safaricom indicated in its financial statements that the network of dealers stood at 39,400 (close to 50% growth from 2011) and M-PESA revenue was at the USD 200Mn mark. As the revenues from voice services dip, M-PESA is standing Safaricom good stead and doing a whole lot of good for the customers and the value chain. Something that started as a trial product is going places and whilst dealers are by no means the only reason behind the success (there was a confluence of many factors in determining the uptake and growth of M-PESA), their role in this cannot be underestimated.

(We did complete the risk assessment document eventually. It was essentially a synthesis of many points of insight that we had collected as we went around “seeking help”. From that point onwards, risk assessments were not done as arm-chair type of exercises. Rather, the product assurance team would convene a workshop of diverse stakeholders from IT, Finance, Marketing, Legal etc and facilitate a brainstorming session. After all, these process-owners are the same ones who are expected to mitigate the risks, shouldn’t they be expected to have a hand in identifying the risks in the first place albeit with RA playing the role of the 3rd eye? We had realized we don’t have all the answers. Frankly, nobody expected us to have all the answers. Sometimes the solution is as simple as admitting you don’t have the solution because only then will other people be able to step in and offer the solution.)

Lastly, it is appropriate at this point to state that if anybody (either current Safaricom employee or ex-Safaricom employee) ever tells you that he/she had faith in M-PESA when it was starting or had foreseen what an impact this service would have, the strong whiff that will accompany that statement is most assuredly cow-dung!

P.S. If any of the readers wonders why I have spelt M-PESA all in caps, please wonder no more. Safaricom insists that the product is M-PESA not M-pesa or m-pesa or m-Pesa or….you get the drift.

Joseph Nderitu
Joseph Nderitu
Joseph Nderitu is a director at Integrated Risk Services Ltd and specializes in revenue assurance. He previously worked as Head of Revenue Assurance and Fraud Management at Vodacom's operation in Tanzania, having previously served in the same role at Vodacom Mozambique.

Before his work with Vodacom, Joseph was an internal audit manager for Airtel, with responsibility that covered their 17 countries in Africa. Whilst at Airtel, Joseph led reviews of the Revenue Assurance, Customer Service and Sales & Marketing functions.

Prior to his stint at Airtel, Joseph was an RA manager at Safaricom in Kenya. He holds an MSc Degree in Information Systems.

4 Comments on "Revisiting the Beginnings of M-Pesa"

  1. Joseph,

    We never synchronized our watches, but ironically I posted a story about M-PESA’s mobile money adventures on a Black Swan article just before I read this post.

    Readers not familiar with how the mobile money system works in Kenya will get a brief explanation of the process there.

    The expert I interviewed, David Birch of Consult Hyperion, is really on top of developments in mobile money area and he makes some very interesting predictions about how that market is likely to evolve, particularly in large industrialized countries.

    Back to Kenya. The question I have about the money transfer is this. If the guys working in the city are mobiling their money home to their wives in the countryside, it begs the question: what are those guys doing in the city on Saturday and Sunday night? And does the wife allow the guy to keep a good stash of money for “recreational” purposes?


    Dan Baker

  2. Dan,

    Let me not answer that question in too much detail because I also work in the city and my wife may be reading this blog. Suffice it to say that what gets to the country-side must be net of very many things – “official and unofficial” tax, bribes to policemen, club fees ;)

    Now that you mention it, there are indeed some innovative ways of using M-PESA and your blog aptly captures this. For example, in central Kenya, there are places where robbers used to visit pubs at night and ask management and patrons to hand over all the cash. Pub owners have found a way to manage this. A customer will pay for a beer using M-PESA. This is done by sending money to an official pub MSISDN. This number is held “in trust” and physically by the pub owner’s wife, safely away from the scene of revelry. If thugs come in, there is little cash to loot. Pub owners will keep some little cash in the register so that the whole set-up does not look too suspicious to the average thug ( I mean how can patrons be having unfinished drinks yet the cash is not adding up). Likewise, customers will not have too much cash.

    (Of course next generation thugs will start forcing customers to transfer M-PESA funds into the thugs account and empty out the funds e.g. by doing a withdrawal later but that leaves too much audit trail and is subject to KYC so it may not catch on).

    The pub owner will settle accounts with his wife later and that way, she always knows how the business is doing. Of course the pub owner now has to think twice before saying “Honey, business has been down lately”.

  3. Joseph,

    LOL! It seems like mobile money is finding all sorts of innovative uses. Never underestimate the power of a merchant chasing money or boys chasing a little fun.

    Bribes and unofficial taxes seem the height of corruption till you realize that in “advanced” countries your wallet is picked by our esteemed elected officials before it even reaches our wallets.

    Through tattered clothes great vices do appear;
    Robes and furred gowns hide all. Plate sin with gold,
    And the strong lance of justice hurtless breaks.
    Arm it in rags, a pigmy’s straw does pierce it.

    King Lear

  4. Avatar Gaurav Varma | 20 Feb 2014 at 7:23 am |

    Hey Joseph

    Perhaps a word on 3G experience in Nairobi?

    Gaurav Varma

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