I am undoubtedly on my phone more in rural Kenya than I am in Southern California. I use my Nokia here for more things than all the apps put together on my iphone at home. Most recently, I am looking at using phones for banking. In past blog entries, I have mentioned Nuru’s teaming up with FrontlineSMS:Credit and Mifos to develop a mobile banking solution. The goal is to allow Nuru farmers the ability to manage their accounts, receive loans, and repay loans with their phones from their fields. I will keep you updated as we progress.
M-KESHO: Mobile banking is becoming a force to be reckoned with in Kenya- at least potentially. For those of you who missed my blog post last week, M-KESHO is a product born out of a partnership between M-PESA (mobile money) and Equity Bank. It allows for a mobile phone-based savings account, which also has loan and insurance capabilities. The idea is to extend branchless banking all the way down to the poorest of the poor- who have a mobile phone. There has been a large void in the Kenyan banking community. Poor, unbanked populations often view the high fees associated with banking as prohibitive. These views are further reinforced with alleged reports of individuals opening accounts, keeping 200 Ksh (<$3.00) in the account only to come back a year later and find the 200 Ksh gone, and the account holder actually owing money to the bank for services. The merits of these allegations are never known, but for many these are plausible outcomes.
M-KESHO seeks to address this void by reducing transaction costs overhead, thereby allowing the majority of their banking services to be free. I feel there is no better way to learn about a product, than to test it oneself. I plan to set up an M-KESHO account ASAP to test it, and see how it works. M-KESHO took Kenyan banking and microfinance by storm last week. I believe that mobile banking will have the potential to expand financial services to the otherwise unbanked. I am, however, wary of early claims that this was the missing link to poverty eradication, and the “mission accomplished” is just around the corner. So many false dawns have been touted in this field that I cannot help but be skeptical. M-KESHO, like any other mobile banking product, is a tool. It may have the potential to be a very powerful tool, but it shouldn’t be ascribed to as the new panacea to poverty.
The Kenyan banking climate is rout with perils for the poorest of the poor. High banking fees, high transaction costs, lower interest rates on savings accounts, a high inflation rate, and predatory lending can all lead to making the poor poorer. By educating and increasing access to services, Nuru is preparing its members to have a securer tomorrow.
Next week I will continue to expand on this series on managing capital.