Innovation and Financial Inclusion in Kenya Innovation and Financial Inclusion in Kenya: A Case Study of M-PESA

Innovation and Financial Inclusion in Kenya Innovation and Financial Inclusion in Kenya: A Case Study of M-PESA

Josphat Njuguna Omanga (Roskilde University, Denmark) and Johannes Kabderian Dreyer (Roskilde University, Denmark)
DOI: 10.4018/978-1-5225-2319-2.ch008
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Abstract

This chapter analyzes the role of financial innovation and mobile phone technologies to financial inclusion in Kenya. In order to do so, a case study on M-PESA is conducted, the leading mobile service of money transfers in Africa, which is offered by Safaricom. M-PESA services are cheap and easy to use in comparison to other formal and informal providers of financial services. It solves two different problems in Kenya: customers do not have to travel anymore long distances to reach financial services and more people can afford them. As result and in line with the literature, this chapter suggests that M-PESA services can be considered a type of disruptive innovation that promotes financial inclusion and wealth growth in Kenya.
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Background

Innovation in delivery channels of financial services, more particularly mobile transfers of money, is one of the areas that led to rapid expansion and access to financial services in rural areas of developing countries. This is especially the case in the Sub-Saharan Africa (Alfred & Stefan, 2010; Demirguc-Kunt & Klapper, 2012; Demirguc-Kunt, Klapper, Singer, & Oudheusden, 2015; Donovan, 2012; Duncombe & Boateng, 2009). Among others, Alfred and Stefan (2010), Donavon (2012), Demirguc-Kunt and Klapper (2012), and Kikulwe et al. (2014) showed that Kenya is one of the leading countries within mobile money technology with its M-PESA services.

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