Cellphone banking takes Kenya by storm

– Before, when Malit Kuronoi needed to pay the cowherd who watched over his cattle in faraway northern Kenya, he made the 500-mile round trip himself. For four days, Mr. Kuronoi rode ramshackle buses across roads patrolled by bandits and bribe-seeking cops, sometimes sleeping by the roadside when a bus broke down, just to deliver the money.

Now he sends it by cellphone.

The Kenyan farmer is among millions who are at the forefront of a pocket-sized financial revolution that's sweeping Africa. Mobile banking, powered by cellphones, is allowing people who could never afford traditional bank accounts to send, receive, and save money, often just by writing text messages.

Cheap and efficient m-banking services are cropping up from South Africa to Senegal. They're the latest example of how the cellphone has transformed life in sub-Saharan Africa, where over the past decade mass-market mobile networks have stitched together countries and families long separated by distance, poverty, and shoddy infrastructure.

Less than one-fifth of Africans have bank accounts, and far fewer access the Internet. The continent, however, recently surpassed the United States and Canada with 340 million cellphone users and is adding another 70 million each year, according to Wireless Intelligence, a market research group.

Cellphone companies are racing to capitalize by offering banking tools that make it easier for city dwellers to send money to rural relatives, small businesses to pay their employees, and parents to deposit their children's school fees. The amounts are relatively small, and the commissions are a fraction of those that major banks and wire services such as Western Union charge.

"It's absolutely changed lives," said Aly Khan Satchu, a Kenyan financial analyst. "This is bringing banking services to the 'un-banked' and the poor. It's very empowering."

Kenya pioneered mobile banking with M-Pesa, for "mobile money," the world's first cellular money-transfer service. Offered by Safaricom – a subsidiary of the British giant Vodafone and Kenya's dominant cell-phone company – M-Pesa allows customers to send anywhere from $1.25 to $440 to any cellphone number in Kenya, with fees that start at less than 40 cents.

In less than two years, the service has registered 5.5 million customers, one-sixth of the country. The average transaction is only about $30, yet each day M-Pesa moves more than $4 million among Kenyans through a network of licensed agents.

The independent newspaper Business Daily recently called it "undeniably the most innovative information-technology product to have ever been launched in East Africa."

With more than 4,200 outlets nationwide, M-Pesa seems to be everywhere, from far-flung villages to teeming slums where no banks or post offices operate.

Before M-Pesa, most Kenyans sent even small amounts of money with friends or relatives who were traveling or through a bus company, exposing their cash to the vagaries of travel schedules, road conditions, vehicle breakdowns, and, of course, thievery.

Safaricom allows customers to keep as much as $625 in M-Pesa accounts with no fees or interest charges, and many Kenyans have begun to use the accounts as mobile safe deposits, storing money before they leave home and withdrawing it from M-Pesa outlets when they arrive.

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