M-Pesa started in 2007 as an electronic money transfer product that enables users to store value on their mobile phones. It is based on a platform of electronic units of money that can be used for multiple purposes including transfers to other users, payments for goods and services, and conversion to and from cash.

M-Pesa and similar digital financial services are representative of the mobile banking revolution in Kenya: financial institutions have embraced M-Pesa as a platform to manage micro accounts, build customer deposits, and broaden their customer network. As a consequence, Kenya has emerged as a leader in financial inclusion in Sub-Saharan Africa. In 2006, just before M-Pesa was launched, only 26.7% of Kenyans had access to formal financial services (such as bank accounts and money transfers) and by 2016 that had risen to over 75%.

This policy brief provides an insider’s view of the regulatory pathway that enabled Kenya’s digital financial services sector to thrive and develop, and draws some policy recommendations from the Kenyan case aimed at all policymakers that seek to catalyse and consolidate a mobile phone-based banking revolution in their respective jurisdictions.

About the author

Njuguna Ndung’u is Associate Professor of Economics at the University of Nairobi and former Governor of the Central Bank of Kenya, and is credited with paving the way for the mobile banking revolution in Kenya. Professor N'dungu was at the Blavatnik School during Trinity term 2016 as the first recipient of the Yaw Adjepong-Boateng Memorial Fellowship, which focuses on the role of Central Banks in Africa and on the continent’s economic development.