Picture credit: SodaHead

This post is written by Shital Shah, SBI Associate Consultant.

The advent of M-PESA, a successful mobile money deployment in Kenya, raises the question of why such efforts have difficulty replicating in countries that are seemingly ripe for the use of mobile phones to increase access to financial services. If a large chunk of the population has a mobile phone in their hands, but they don’t have access to bank accounts, then they should be able to link the two together and solve the problem. This sounds reasonable in theory, but financial services are not offered in silo – they are primarily informed by regulations and a legal framework, which varies from country to country.

One reason why M-PESA may be a one hit wonder is due to Kenya’s regulatory environment with regard to mobile money, which was non-existent when Safaricom, the largest telecom operator in the country, first started M-PESA. As a result, regulations in Kenya were created as a reaction to a telecommunications company offering banking services, rather than a proactive central bank guiding the development of a banking innovation. By the time regulations came out of Kenya, M-PESA had reached scale. The likelihood of a similar trajectory happening in other countries, where banking industries may be more active in influencing policy or where regulators are proactively putting in place measures to control financial services beyond bank branches, is slim. Continue reading →