More than half of Kenya’s entire GDP is now transacted on this African fintech app

Njeri’s humble stand, situated in the bustling Woodley Jamhuri open-air market in the Kenyan capital, is a sensory explosion. Bright red tomatoes are piled high alongside stacks of oranges and limes. Pineapples stand on end; corn and knobby root vegetables compete for customers’ attention. Loyal clients have been seeking out her goods for more than a decade, and they keep coming back.

“I run a small grocery business,” she tells Fortune. “But now it is growing. A lot.” 

That’s no small boast. 

Kenya, like most emerging economies, has been hard hit in the past two years by a one-two punch of COVID, followed by inflation. The latest government data from January showed consumer prices have jumped more than 8% from pre-pandemic levels, sapping the purchasing power of ordinary Kenyans—including Njeri’s customers. The damaging effects of rapidly rising prices can quickly domino on small businesses, too, particularly those that are unable to track and forecast input costs.

Still, Njeri’s business has been faring well, she contends. Despite the uncertainty in the wider economy, she’s hired an additional two women to keep the business operating through the late-evening hours, seven days a week. 

She credits part of her success to an intuitive piece of payments-and-accounting software that she can pull up on her smartphone. The app, called M-Pesa for Business, tracks in real time the money flowing in and out of her business. She knows, for example, the moment she turns a profit for the day. That kind of data brings peace of mind in uncertain economic times, she says. With a few taps she can use the application to pay off her business suppliers, or transfer funds to her bank account. She can also use it to purchase something at a nearby stand to bring home to the family.

Older than the iPhone

The app Njeri relies on went live a year ago, but the mobile-money platform it sits on, M-Pesa, is hardly new to Kenyans: “Pesa” is Swahili for money, and “M” is a reference to mobile. Launched in 2007 by Vodafone and its African subsidiary Safaricom, M-Pesa just turned 15 years old this month, which makes it older than the iPhone and such fintech giants as Ant Group of China, Venmo, and Stripe. Its success is built on a simple proposition. Customers pay cash, or make a transfer from their bank account, to an agent to top up their M-Pesa account on their mobile phone. That balance can then be used to send money to others (you just need the other party’s phone number), or to make purchases at the millions of businesses around Africa that accept the cashless payment system. Unlike, say, Venmo, Kenyans can use M-Pesa to receive their monthly government-issued pension payment. Safaricom also recently launched a way for Kenyans to use M-Pesa to buy stocks and bonds on the Nairobi Securities Exchange, bringing a new generation into retail investing. For merchants like Njeri, the M-Pesa platform continues to expand, too, with, for example, bookkeeping and accounts-payable services for merchants via the M-Pesa for Business app.

M-Pesa operates in seven African countries—in addition to Kenya, it’s active in Tanzania, Mozambique, Democratic Republic of the Congo, Lesotho, Ghana, and South Africa—with over 52 million active users. If you’ve ever traveled in these countries, you have no doubt seen the distinctive M-Pesa signs—white lettering on a green background—dotting the streets, indicating where agents sell M-Pesa “air time” to anyone with an active mobile phone account. In 2020, M-Pesa’s telecom parents launched the holding company, M-Pesa Africa, to manage its multinational growth.

M-Pesa, and similar mobile money products by Orange and MTN Group in southern and west Africa, have long been credited with lifting families out of poverty by offering Africa’s unbanked a much needed line of credit, and helping grow a new entrepreneur class around the continent. The biggest criticism: The explosive growth of a few digital-payments giants in Africa has created a bunch of local monopolies that some, like the Gates Foundation, would like to see opened up to more competitors at a time when the world is trying to go cashless.

Sitoyo Lopokoiyit, managing director of M-Pesa Africa, thinks that criticism is misguided. He says the M-Pesa payments platform is now a major launchpad for Africa’s fintech community. “Our platform has become a powerful flywheel” for over 52,000 third-party developers who use it to sell to M-Pesa customers a wide range of products, from insurance to solar panels, he tells Fortune.

COVID growth spurt

Not even the surge in crypto or COVID has slowed M-Pesa down.

Last year, during the height of the pandemic, M-Pesa hit an astounding milestone. Safaricom reported to investors that half of Kenya’s GDP is transacted on the M-Pesa platform; the levels have grown since then.

“COVID has been an economic and a health crisis. It has been the biggest accelerant, too, to digital services such as M-Pesa,” Lopokoiyit says. “I strongly believe that if society is successful, then we will be successful. So we must put that at the heart of everything that we do.”

According to Lopokoiyit, there are over 2.5 million small and medium-size enterprises like Njeri’s that operate with M-Pesa. Another 150,000 large businesses, including beverage giants Coca-Cola and Diageo, use M-Pesa to make every part of the supply chain—from the distribution hub to the delivery truck to the bar or small business—cashless and digitized.

The business imperative to go digital was a lifesaver in Kenya, as elsewhere around the world, during the early days of COVID. When businesses and schools shut in the spring of 2020, most of Kenya’s small businesses had little to no way to reach locked-down customers. M-Pesa responded to the crisis by first waiving fees on all transactions below $10, a way to help out its most vulnerable consumer and merchant customers. And then in Q1 2021, it introduced expanded functionality for merchants like Njeri: The M-Pesa business app could now take customer orders remotely—typically, via text message, WhatsApp, and email—a move that ushered them into the e-commerce age.

“We now have 150,000 monthly active business users on that app, and 47% of the transactions now happen on that app,” Lopokoiyit says, “which is remarkable” for an e-commerce product that didn’t exist before COVID. He adds that the introduction of the new e-commerce capability on the M-Pesa for Business app now means M-Pesa fulfills 60 million transactions per day across its network.

Njeri, at her vegetable stand in Nairobi, sees the difference. She says for every customer who pays in cash, two pay with M-Pesa now, a big jump since the start of the pandemic. The business is on much better footing, she notes, so much so that she recently bought a car to help transport goods to the market. And she’s closing in on a dream: a new house.

“That’s what I’m planning for,” she says.

March 10, 2022: This post has been updated to clarify the most common way to top-up an M-Pesa account.