Lessons on M-Pesa's Economic Impact and Wealth Creation: A Systems Thinking Approach
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Niti Bhan is Founder at the Emerging Futures Lab. Niti integrates her multidisciplinary background in business, design and engineering with a global perspective to offer immediately actionable insights and strategic directions for successfully entering the challenging markets of the developing world.
Much of the topic in today’s discussions on Africa especially here on Afrinnovator is the mobile phone. When it comes to M-Pesa and its socio-economic impact in Kenya, we find that some of the issues why it became a runaway success in Kenya have not yet been duplicated elsewhere. Beyond the obvious brought up in most articles of “…it’s the banking regulations (or lack thereof)” or “…it’s the distribution network.” I believe that if we can frame the problem (and thus the potential solution) correctly, we could make a big difference to the many ways we attempt to enable and support social and economic development projects.
For purposes of clarity, I’ll also refer to the mobile phone as the mobile platform, since the phone aspect is but a feature of this handheld device. It has played quite the role among what is popularly known as the BoP or Base/Bottom of the Pyramid, yet when I think about the very many pilot programs and attempts to spur development via the mobile platform or, as in the case of M-Pesa, to launch game-changing mobile money transfer systems elsewhere, what immediately comes to my mind is a reflection on the issues that plagued the analysis of the success of Asus’ eeePC when it was first launched back in late 2007.
We take affordable and portable netbooks for granted today but back then in time, the category did not exist until Asus launched their 7″ Linux-based, open source, rugged and durable beauty for around USD 400. It was referred to as a “subnotebook” back then and caused much head scratching among the developed world’s leading lights. Nevertheless, it spurred all manner of competitors to focus on the two most obvious elements of its perceived success criteria – “price” and “form factor”. Whereas I argued, that what made the Asus eeePC so successful was its fundamental premise – to be an easy to use affordable device squarely aimed at emerging markets and how it was this positioning that drove every other element, including its form factor and price. By focusing only on the obvious, without taking the holistic thinking and underlying value proposition into consideration, competitors were overlooking many of the details that supported its initial success.
Framing the Debate on M-Pesa
I see something similar happening with one of the most obvious success stories in the “Mobile as a platform for economic development of the BoP” bandwagon. M-Pesa shows up in most analyses of “Business models or mobile thingies that are helping the poor” reports churned out so faithfully by researchers everywhere, yet the question arises, should it be even considered in that sandbox of things that help the poor in the first place? And by doing so, are we overlooking some of the factors of what makes it work so well in Kenya as well as misinterpreting that it was meant to be used only by the poor?
When the first reports of M-Pesa’s hiccups in South Africa came to light, it was then that Wambura Kimunyu first tweeted to me about the lack of the banked that were critical to spur the unbanked and thus the overall uptake of the service. That is, if the M-Pesa ecosystem did not have enough banked people with money to circulate, then there wouldn’t be enough unbanked nor would there be enough money to circulate leading to the challenges that they are facing in South Africa now. You needed the banked to bank the unbanked. It sounded counterintuitive but over time as I observed many different facets of this activity across different strata in Kenya it came to me just how much sense this made. It also proved how relevant this aspect was for the success of anything that should be considered as a means to improve incomes among the BoP when using the mobile platform or otherwise.
Adding Systems Thinking to the Debate
That is, for any solution designed to enable the flow of wealth – mobile money transfer for example – or improve wealth creation at the BoP – it was not enough to simply target the poor alone. It would not work as a “Solution for the BoP” primarily because the BoP do not have any liquidity. Even if they do indeed have assets especially in rural areas, or they do not have the cash for it to flow through the system in the first place. Thus solutions aimed at improving economic activity for the poor needed ‘non poor’ actors in the ecosystem in order to inject cash into the system and thus make it flow and grow initially.
Taking this thought one step further, M-Pesa – assessed as a holistic ecosystem for financial transactions – has been so very obviously successful in the Kenyan context primarily because it is used by everyone, regardless of their economic standing or “bankedness.”
And thus, when ‘solutions on mobile to help the BoP’ are considered, they should be looked at in terms of the complete ecosystem including the critical question of where the money will come from in the first place? Without which, they will limp along as a cash-poor system with little wealth to circulate, achieving nothing for the BoP in question. Look at this article on M-Pesa repositioning itself in South Africa towards higher income brackets and away from the original target audience of poor rural women.
Solutions to Improve Economic Conditions For the BoP Cannot Be Focused Only On the BoP
Rather the focus needs to shift to complete ecosystems that fill a vacuum of need – usually in infrastructure or services – that include actors from differing socio-economic strata in order to make a viable difference to larger population involved. Not only is M-Pesa a clear example of this framing – it filled the vacuum of “how to securely and affordably send money” – but it did so for everyone and anyone who wanted to do so.
Similarly, when I consider my favourite example of the Mumias Sugar Company and their payroll management pilot program for their daily wage sugar cane cutters, I see the same potential for a greater impact on social and economic development for the lower income demographic involved in this system. The solution is one that is win-win for all stakeholders – from the company who don’t need to send armed guards with cash into the fields, to the workers who no longer need to carry sums of cash around with them on payday and even have savings accounts now.
I also hear that real-time inventory management and other enterprise level solutions for supply chain management are also moving onto the M-Pesa/mobile platform in Kenya – again involving the tiniest duka (small retail store) as well as the big name manufacturers or distributors. Again we can see the potential impact on inventory management and thus, cash flow, even at the bottom of the retail pyramid where it’s most critically needed. We can project the potential that it will improve the economic standing or at least smoothen the variability of income streams that these smallest players in the informal economy require.
Will all stakeholders benefit? Yes. And will the members of the ecosystem who happen to fall into the so called BoP category benefit? Most likely. And more likely than if only the lowest segment was involved in a system of this sort rather than participating in the larger ecosystem of buyers and sellers.
The Bottom Line
Bringing all this back to the framing of the solution and the analysis of the success factors, I believe that a simple shift away from seeing only the obvious – mobiles! money! Bottom of the Pyramid! – system level solutions that fill critical infrastructural and service gaps in locales where there are few or inadequate alternates and that serve many including the BoP can and will do far better to improve the economic wellbeing across the board of society that those that focus on one demographic alone.
Author’s note: With thanks to Wambura Kimunyu.
What do you think? Is M-Pesa’s value from the Bottom of the Pyramid overstated? Chime in below in the comments.