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Hitting the Books: Kenya's digital divide is hampering its mobile money revolution

Andrew Tarantola
·Senior Editor
·11-min read

While mobile money apps have been slow to gain acceptance in the US, they’ve taken other nations like Sweden, China and especially Kenya by storm, enabling people for whom conventional banking has remained out of reach new ways to send, receive and invest their hard-earned cash. In Reimagining Money: Kenya in the Digital Finance Revolution, author Sibel Kusimba examines how apps like M-Pesa have radically adjusted the ways in which everyday people throughout Africa manage their money. In the excerpt below, Kusima looks at the financial roadblocks that prevents a significant portion of the country’s population from participating in this emerging digital economy.

reimagining money
reimagining money

Excerpted from Reimagining Money: Kenya in the Digital Finance Revolution by Sibel Kusimba, published by Stanford University Press. ©2021 the Board of Trustees of the Leland Stanford Junior University. All Rights Reserved.

Digital inequality describes the uneven distribution of connectivity and access to digital infrastructures. Often these inequalities are assumed to be a natural problem of rural areas, one that broadening the agent network or switching to smartphones will remedy. The way these networks themselves produce and amplify inequalities is less rarely considered. Maintaining a phone over time, replacing and fixing it, purchasing airtime, and paying for money transfer (including cash-in/cash-out fees) displace significant costs onto the users, with the result that inequalities based on social class, gender, and disability affect the ability to securely access mobile technology. Users in Western Kenya frequently access the phones of others or keep a SIM card that they insert into a borrowed handset. Accessing phones or handsets through social relationships may be more likely among women and can create social dilemmas and risks ranging from compromising one’s PIN number to jeopardizing one’s physical safety. Literacy and numeracy are also barriers: at least one billion people cannot read digital displays of money amounts accurately; yet people in Myanmar, Ethiopia, and Tanzania are quite competent in using colors and symbols on cash money to denominate, earmark, and plan money use. Accessing services often requires local knowledge—for example, which hill is the one to climb to find mobile network service? People who are more than a short walk from a mobile money agent may see no reason to keep e-money on a mobile wallet when they will need cash for their daily use, which they can keep at home. Most rural areas—including rural Western Kenya, the setting of much of the field research for this book—still experience regular interruptions in electricity, and smartphones are largely nonexistent. According to FSD Kenya, in 2016 only 16% of Kenyans owned a smartphone—a fact frequently forgotten in the race to become a fintech hub.

In Kenya’s urban settings, smartphone and Internet access are more common. Here, the mobile money channel is increasingly used together with social connections on platforms such as Facebook. WhatsApp, the cross-platform instant messaging and voice over IP service offers text and media messaging, voice and video calls, and user location sharing. WhatsApp, I learned, was the main reason why the Nairobi dweller wanted a smartphone. It can be an achievable status marker: Chinese Huawei smartphones were widely advertised for around $60–$80 in 2016. By this time, the feature phone I had fondly kept since 2009 provoked concern, as it hardly connoted sufficient status. When visiting the doctor’s office in Rwanda in 2016, I was told, “Such a person as yourself should not have a phone like this.” The handy feature phones were now called kabambe (roughly, “little cute thing”) or mulika mwizi (“to shine light on a thief ”). They were sold for as little as $20—and still used.

I discovered the importance of kabambe when living with my sister-in-law Lillian in 2016 and 2017 in Kawangware, an area in the west of Nairobi. A high school teacher with two daughters in college, Lillian’s husband had died suddenly a few years earlier. Her Samsung smartphone stayed in a locked bedroom cabinet during the day, while she rose at four a.m. to commute across town to her school by public transportation, returning at close to nine every night. After dinner she unlocked the phone and connected to her WhatsApp groups and to Facebook on its generous screen.

Twice during my stays, Lillian’s kabambe—which she used during the day on her commute—was stolen at a crowded bus stop. I also was once on the city bus with several thieves, one of whom posed as a ticket collector. As they left in a rush, my seatmate discovered that his money and kabambe were missing. Although smartphones are widely advertised and sought after, they are rarely in view outside of upscale restaurants and spaces. Hopeful international start-ups with Internet-based products have not considered the contingencies of daily life in the city nicknamed “Nai-robbery.”

Instead of following an approach based on creating and installing apps on expensive smartphones, designers can use another medium—universal applications. Universal apps can reach people on any phone, including basic phones, and are particularly important for development initiatives. Universal apps include voice, SMS (Short Message Service), and USSD (Unstructured Supplementary Service Data), which has the most design flexibility. M-Pesa and Safaricom’s group messaging service, Semeni, use USSD programming. Safaricom users have memorized many sets of star codes that allow them to query balances or perform other functions. However, USSD communication sessions have a set time duration, and many designers consider them limited. Regardless of which design approach they choose, digital commerce and finance start-ups are flocking to Nairobi’s growing fintech sector. Aside from digital microloans (see Chapter 4), digitizing agriculture is a big focus. I attended a reverse hackathon (technology redesign event) in Nairobi in 2017 as an anthropologist to crowdfunding start-up M-Changa (see Chapter 10). Here I met representatives from local companies who had come to help farmers get comfortable using digital financial products. The start-ups included iShamba (shamba means “farm”)—an information service for farmers; Cowsoko (soko means “market”)—for livestock e-commerce; Chomoka (“unleashed”)—record keeping for savings groups; and Maano, another virtual farmers’ market. Timiza digitizes microfinance group savings programs; Digicow enables farmers to make data-driven decisions about dairy production; AcreAfrica links them to insurance; Farmdrive, Digifarm, and many others provide them with loans. Data-driven agriculture could make credit and insurance much cheaper and more available and make a precarious and risky way of life more predictable. Many platforms such as Digifarm, a Safaricom partner, bundle end-toend services, offering credit, inputs like seeds and fertilizer and pricing and weather information, and improved access to a market through its Digisoko partner. For example, some platforms are managed by the buyers of, say, green beans meant for export to Europe; they sell the seeds, offer credit, and buy the finished product, and they work with individual farmers or with farming cooperatives. These platforms also bring together and control as much data as possible about clients, including social media use and financial behavior, along with farm productivity, weather, and geospatial data, all of which are used for credit scoring. Observers worry that this kind of pervasive data control could embed inequalities and disadvantage farmers who experience drought or those who lack other sources of income to repay loans. Over a buffet lunch, company representatives at the hackathon shared an extensive array of quite different concerns: their difficulties in advertising for, finding, and retaining customers. They bemoaned what they saw as the communicative limitations of SMS and USSD protocols: once customers have memorized star codes to interact with a mobile operator, they don’t like changing or learning new ones. Other problems they mentioned included, the inability to advertise, and problems with network connectivity. Digifarm, by far the largest of these agricultural digital finance platforms, has about one million users already subscribed and aims to enroll five million subscribers by 2022.

The hackathon event itself provides clues as to why such platforms fail to find customers. The gathering was held at a posh hotel in the upscale Westlands neighborhood of Nairobi. The farmers I met included a member of parliament, college students interested in commercial farming, and representatives of farming cooperatives. One farmer told me he had paid to take a 60-kilometer bus ride early that morning. Developers and farmers were paired up or put in small groups that tested apps or SMS scripts for opening accounts and communicating with providers. Little else of the experience or needs of farmers, particularly rural smallholders, was probed, such as the ongoing rural crises of landlessness, low productivity, climate change and food insecurity. The event focused on the Nairobi area and on commercial markets, especially international ones, and exemplified the reasons why so many apps and platforms fail to give target customers a reason to use them.

The most successful approach builds on what people are already doing. As the lessons of sambaza showed, remittances are the key, along with using the agent network to reach customers. Equity Bank became the largest bank in Kenya by scaling rapidly through its agent network and through mobile phone loans. And the agent network is indeed very capable of scaling across the continent. Consider the case of MFS Africa, which has grown one of the largest payment networks in Africa by building on the agent network. Dare Okoudjou is CEO of MFS Africa. Originally from the Ivory Coast, he began his career with MTN, the South African mobile network operator (MNO). Early on he realized that the problem of scaling African fintech would be interoperability. Interoperability refers to the fact that mobile money systems operated by different companies and in different countries were unable to communicate with each other. Interoperability severely limits people’s ability to send and receive money.

Okoudjou’s company, founded in 2015, gradually built a cross-border remittance product to connect the patchwork of MNOs across national boundaries. MFS Africa designed an application programming interface (API) that had the capacity to act as a messenger between the mobile money systems operated by different companies, thereby making it possible for MFS to draw more and more mobile service providers over time into the interoperable network provided by its API. Beginning in East Africa, where MFS Africa first applied their API to integrate MTN and M-Pesa transfers, the company has gradually integrated more and more MNOs and countries into its network. In 2020 MFS Africa’s partners included 22 MNOs in 27 African countries, and together this network can reach 180 million mobile money customers through 2 million cash-in/cash-out agents. The network also includes money transfer operators like World Remit, as well as banks, fintechs and companies that want to pay commissions or salaries.

Okoudjou’s goal is to eventually connect all mobile money agents in Africa and to provide the interoperability that can lower costs. He works with “the reality . . . that the vast majority of people across sub-Saharan Africa are still using feature phones, or even more basic phones.” He explained that many innovators don’t want to work with the USSD communication language of these phones:

North of the Limpopo, people use USSD, which is a very rudimentary channel to try to do any type of service. The ability to work on a channel that is very unfriendly to developers is something that is really quite unique to the rest of the continent. . . . In the United States, Europe, even Cape Town, they wonder, why don’t you just do an App when you are doing money transfer?

In a SoundCloud interview, he elaborated on the difficulties of sustaining two-way communication between agents and mobile network operators to enable cross-border money transfers, all while complying with identity and antimoney laundering regulations:

[USSD] is a very rudimentary channel. You have to get things done in 45 seconds or the channel will close. You still wanna get forex through, the customer confirm, the kyc check, the aml check.25 You do not know when the electricity will go off, or if the servers will go off. When it rains transactions won’t go through because some links to internet are still running on VSAT.26 If [it] is raining you will get so many complaints.

As an innovator, Okoudjou is committed to working with the agent network. “At the end of the day digital money in Africa was not about the technology but about the agents,” he noted at a 2018 conference, where he emphasized that African fintech companies, to scale their products, must perfect their service and experience with accessible and universal SMS/USSD communication protocols if they want to reach a broad range of customers.

Agents and cash-out services are still fundamental. The realities of cost, access, uptake and usage, and Internet and smartphone use question the leapfrogging imagery. Instead, innovators are charting an African path to money. As Okoudjou said, “If we can operate in this environment imagine what there will be [for Africa]—when we have infrastructure.” Okoudjou is innovating in the context he has to work with now. He is imagining a better money infrastructure in the future, and building towards it in the present.