M-PESA (m for “mobile”, pesa is Swahili for “money”) is a mobile-phone based money and microfinance service offered by Safaricom in Kenya. According to Wikipedia, it is “the most developed mobile payment system in the world. M-Pesa allows users with a national ID card or passport to deposit, withdraw, and transfer money easily with a mobile device.”
None of the MFIs in Kenya handle any money – they all require the group to collect cash amongst themselves and someone from the group takes the cash to the bank to deposit into the MFI account, providing a receipt to their loan officer who takes it to the branch office for processing in the system. But the data entry is still manual and therefore, subject to human error.
The most tech-savvy of the MFIs, however, collect loan repayments and even make loan disbursements through M-PESA, whereby the client need not handle any cash either, making it a more secure option for the poor. As it happens, nearly everyone in Kenya has an M-PESA account, so this is easy to do.
One of the MFIs I visited, Musoni, has won awards for the most innovative use of technology. In addition to using M-PESA for money transfer, Musoni is also starting to use tablets to allow loan officers to create loan applications out in the field, even uploading photos of clients and national IDs directly to the system. They are in the process of becoming entirely paperless, with the ability to disburse loans within hours instead of weeks by convening a “virtual” loan committee of officers in the field through chat (rather than waiting until they are all present at the branch office). Very creative. The transfer of money directly to and from the client’s M-PESA account reduces the opportunity for human error, making it more efficent and cost effective, potentially bringing down the interest rates they charge the poor, one of the biggest complaints against MFIs today.
It’s been very interesting to see the similarities and differences between the way these various MFIs operate both in India and Kenya. Now it’s time for me to go back home armed with this most valuable information to improve the user experience for Mifos.