Analyzing & Summarizing the Innovation Environment Safaricom’s Mobile Banking Introduction In 2005, Safaricom, a mobile phone company based in Kenya launched M-PESA, a mobile money transfer technique. This innovation was however a brain child of Vodafone, which is Safaricom’s subsidiary company based in the United Kingdom. With funding from UK based Department of International Development (DFID), Safaricom, which is Kenya’s leading mobile service provider agreed to roll out the M-PESA on a trial basis in the East African country. The pilot program which commenced in October 2005 saw one mainstream bank and a microfinance institution partner with the mobile service provider for purposes of providing it with the banking infrastructure needed during the pilot period. Kenya as a market Kenya is an African country located on the east side of the continent. The country is astride the equator and borders Tanzania on the South, Uganda and Ethiopia on the North and Somalia on the North East border. To the Southeast lies the Indian Ocean. 2007 estimates indicate that Kenya has a population of approximately 37 million people with annual growth rate estimated at 2.8 percent (Fan, 2009). Although fairly late adopters in mobile telephony, People in Kenya have caught up pretty fast. In 1999, two mobile operators, Safaricom and Celtel ventured into the Kenyan market. By the end of 1999, only 17,000 Kenyans had subscribed to mobile telephony. By December 2007 however, 11.3 million Kenyans had subscribed to mobile telephony. Meanwhile however, other mobile telephone companies had entered the market. Fortunately for Safaricom, it remains the largest mobile service provider gauged by the subscriber base. According to Omwansa (2009), the company has 80 percent share of the entire market size. When Safaricom launched M-PESA, it commissioned agents in different parts of the country; the agent’s work was primarily to receive deposits from customers and electronically transfer this to the client’s M-PESA account. This electronic money transfer would then be registered as a cash float on the clients phone account. The agents also allowed clients to withdraw money from their accounts by simply entering the amount they wanted to withdraw on the cell phones M-PESA menu, followed by the agent number. In a country where commercial banks are few and wide apart, this financial innovation was embraced by both the banked and the unbanked population largely due to the convenience and the ease of transaction. Safaricom however maintained that the M-PESA account was not a bank account mainly because people could neither earn interest on money deposited nor take up loans as is the case with ordinary banking accounts. How M-PESA works Once a person opens an M-PESA account through an authorized agent, Safaricom registers this as an electronic account that one can use to receive, send or withdraw money. Any money deposited in the account is managed by Safaricom, which pools the amount in a mainstream bank in the country. By pooling the money in the commercial bank, Mas & Morawczynski (2009) notes that the amount is backed as liquid deposits in the commercial bank. The agents spread through out the country allow people an easy access to money as compared to