The Kenyan payments market is known for the success of M-Pesa,
the m-payments provider which has taken the country by storm. The
value of mobile payments in the country is equivalent to 11% of the
country’s GDP, a figure which looks likely to grow. A survey
conducted by CI on Kenya (see Kenya: A launchpad for financial
inclusion) indicates mobile will surpass debit as the
country’s preferred payment option by the end of this year.
But Kenya is about more than just
m-payments. The country is developing into a hotspot for electronic
payments and is likely to become a hub for wider growth in east
Africa. The reasons are structural, demographic and political.
The explosive growth of M-Pesa and
m-payments in Kenya has sometimes overshadowed the excellent
progress made more generally in the country’s payments market.
Debit card usage has developed almost in sync with the mobile
channel and registered growth close to 1,000% since 2004, according
to central bank data.
The number of ATMs, POS terminals
and, more recently, prepaid cards have also increased at an
impressive rate. Credit cards have been the only real
disappointment. Lower income workers in the country are averse to
taking on debt, which is in part why prepaid e-wallets have caught
on to such an extent in the mobile payments space.
Demographically and economically,
the country is well positioned, with an average age of just 18 and
expectations of reasonable medium-term GDP growth. Young
populations are willing to embrace innovation and technology and
have long working lives ahead of them to become wealthier and
consume more banking products and services.
Politically, Kenya is renowned as
one of the most peaceful and stable African states. It has signed
an agreement with fellow east African countries Uganda, Tanzania,
Burundi and Rwanda to harmonise payment systems and, eventually, to
enter a monetary union, scheduled for 2012.
The timeline looks ambitious, and
it would be inaccurate to say there are no obstacles to building
thriving economies and payments systems in east Africa. The riots
during Kenya’s 2008 elections, in which 124 people died, were an
unwelcome reminder that the country is not immune from civil
Still, the country and its neighbours are showing encouraging
signs in the integration process. The payments industry will have
an important roll to play in making sure the economic potential is
turned into reality.