– 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.
Those deposits can amount to several million dollars, and traditional banks argue that M-Pesa is operating as an unregulated financial institution. Kenyan government auditors issued the service a clean bill of health last month, saying that by imposing transaction limits and requiring customers to transfer money through licensed agents, Safaricom minimizes the risk of money laundering.
Chief Executive Officer Michael Joseph, who's built Safaricom into East Africa's most profitable company by marketing to low-income consumers, said M-Pesa didn't aim to compete with banks.
"The average transaction is $30. You go to a bank and try to transfer $30, it probably will cost you $5," Mr. Joseph said. "It's not worth it to them. They can't afford to do what we do."
Safaricom doesn't expect M-Pesa to become a major profit center – it only recently ended its first month in the black – but it's spawned a host of imitators. Vodafone has introduced the concept in Afghanistan and Tanzania, and the rival Orange network plans to launch mobile banking in Cote d'Ivoire, Senegal, and Mali. Safaricom is exploring a low-cost service to transfer money to and from Britain, which is home to tens of thousands of expatriate Kenyans.
Experts say that the services have improved financial security dramatically for rural families because urban relatives, freed from having to travel to deliver the money themselves, can send more cash more often.
"The biggest thing M-Pesa has done is released money flows in Kenya," said Olga Morawczynski, the author of a forthcoming study of M-Pesa for the Consultative Group to Assist the Poor, a research arm of the World Bank. "People know they can send money more easily, and that's starting to increase the money that's coming into the rural household."
The service isn't without hitches. In rural western Kenya, Ms. Morawczynski said, some families complain that their city-dwelling relatives don't come home as often. Rural agents handling numerous withdrawals sometimes run out of cash, forcing them to make long trips to banks.
There also are the hiccups that accompany any new technology. One morning this month, a distraught middle-aged woman in a smart business suit presented herself at the reception desk of Safaricom's gleaming glass headquarters in Nairobi.
She'd entered one wrong digit on her M-Pesa transaction and inadvertently sent $380 to a stranger. Not knowing what to do, she pleaded with the receptionist, who called the unwitting recipient and explained what had happened. The man agreed to return the money.
"That is a great Kenyan," the woman said, shaking her head in relief. "That is a great Kenyan."
Joseph said that such mistakes were common, but that M-Pesa agents got the senders' money back with surprising regularity.
"The concept," he said, "is still catching on."
For more on cellphone banking in Africa, click here.
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