page_title: M-Pesa
section_title: History
hierarchical_section_title: M-Pesa / History
caption_attribution_description: English: M-PESA mobile money and Equity agent in Nairobi, Kenya.
context_page_description: M-Pesa is a mobile phone-based money transfer service, payments and micro-financing service, launched in 2007 by Vodafone Group plc and Safaricom, the largest mobile network operator in Kenya. It has since expanded to Tanzania, Mozambique, DRC, Lesotho, Ghana, Egypt, Afghanistan and South Africa. Meanwhile services in India, Romania, and Albania have been terminated amid low market uptake. M-Pesa allows users to deposit, withdraw, transfer money, pay for goods and services, access credit and savings, all with a mobile device.
  The service allows users to deposit money into an account stored on their cell phones, to send balances using PIN-secured SMS text messages to other users, including sellers of goods and services, and to redeem deposits for regular money. Users are charged a small fee for sending and withdrawing money using the service.
  M-Pesa is a branchless banking service; M-Pesa customers can deposit and withdraw money from a network of agents that includes airtime resellers and retail outlets acting as banking agents.
  M-Pesa has spread quickly, and by 2010 had become the most successful mobile-phone-based financial service in the developing world.
context_section_description: Safaricom and Vodafone launched M-PESA, a mobile-based payment service targeting the un-banked, pre-pay mobile subscribers in Kenya on a pilot basis in October 2005.
  It was started as a public/private sector initiative after Vodafone was successful in winning funds from the Financial Deepening Challenge Fund competition established by the UK Government’s Department for International Development to encourage private sector companies to engage in innovative projects so as to deepen the provision of financial services in emerging economies.
  The initial obstacle in the pilot was gaining the agent’s trust and encouraging them to process cash withdrawals and agent training.
  However, once Vodafone introduced the ability to buy airtime using M-PESA, the transaction volume increased rapidly. A 5% discount was offered on any airtime purchased through M-PESA and this served as an effective incentive.
  By first March 2006, 50.7 million Kshs had been transferred through the system. The successful operation of the pilot was a key component in Vodafone and Safaricom’s decision to take the product full scale. The learning from the pilot helped to confirm the market need for the service and although it mainly revolved around facilitating loan repayments and disbursements for Faulu customers, it also tested features such as airtime purchase and national remittance.   The full commercial launch was initiated in March 2007. 
  A snap shot of the market then depicted that only a small percentage of people in Kenya used traditional banking services. There were low levels of bank income, high bank fees incurred and charged; most of the services were out of geographical reach to the rural Kenyan. 
  Notably, a high level of mobile penetration was evident throughout the country making the adoption of mobile payments a viable alternative to the traditional banking channels. According to a survey done by CBS in 2005, Kenya then had  over 5,970,600 people employed in the informal sector. This informal sector constituted 98%
  In 2002, researchers at Gamos and the Commonwealth Telecommunications Organisation, funded by Department for International Development UK (DFID), documented that in Uganda, Botswana and Ghana, people were spontaneously using airtime as a proxy for money transfer.  Kenyans were transferring airtime to their relatives or friends who were then using it or reselling it. Gamos researchers approached MCel in Mozambique, and in 2004 MCel introduced the first authorised airtime credit swapping – a precursor step towards M-Pesa. The idea was discussed by the Commission for Africa and DFID introduced the researchers to Vodafone who had been discussing supporting microfinance and back office banking with mobile phones. S Batchelor (Gamos) and N Hughes (Vodafone CSR) discussed how a system of money transfer could be created in Kenya. DFID amended the terms of reference for its grant to Vodafone, and piloting began in 2005. Safaricom launched a new mobile phone-based payment and money transfer service, known as M-Pesa.
  The initial work of developing the product was given to a product and technology development company known as Sagentia. Development and second line support responsibilities were transferred to IBM in September 2009, where most of the original Sagentia team transferred to.
  Following a three-year migration project to a new technology stack, as of 26 February 2017, IBM's responsibilities have been transferred to Huawei in all markets.
caption: M-Pesa kiosk in Nairobi, Kenya in 2016.
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