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Sub–Saharan Africa is a global leader in the development of mobile financial services. Out of every ten mobile transactions worldwide, seven occur in Africa. The rapid spread of fintech, in which the Central Bank of Kenya played a key role, gave rise to the rapid development of the economic development and innovation.
How It All Started
It all started in 2007 in Kenya with the M-Pesa system, which gave people the opportunity to transfer money to each other with the press of a button on a mobile phone. Today, the service allows users to pay for utilities, health insurance and medical treatment, purchase goods, take out and repay loans, manage savings, receive government services, pay taxes, pay school fees, buy bus or plane tickets, and even invest in government bonds. You can deposit and withdraw cash using agents who function like ATMs — is 50 times higher than the number of ATMs.
Not only does money move in the country with the help of mobile phones: the developed IT infrastructure, fwhich earned Kenya the nickname “Silicon Savannah”, has become the basis for the development of other non-telecommunication industries. For example, the Twiga digital platform has brought together agricultural producers and sellers, allowing farmers to reduce crop losses from 30% to 4%, and a a similar pharmaceutical marketplace also verifies the authenticity of medicines, preventing counterfeit products.
The spread of the M-Pesa service, which has become the most striking example of the global fintech revolution, helps Kenya reduce poverty, increase total factor productivity and real income growth, and, according to the Kenyan Minister of Information, fight corruption.
In Sub-Saharan Africa overall, almost every second resident has a mobile phone, as well as access to electricity, and in some of these countries mobile phones are more common than electricity access (including Kenya itself, where electricity is available to only two-thirds of the population). But fintech also solves this problem: for example, the solar home system that M-Kopa, founded by a co-founder of M-Pesa, supplies to rural residents on credit includes a SIM card connected to a mobile network, which users top it up via mobile money accounts until they pay in full.
The Fintech Revolution and the British Government
In 2002 Nick Hughes, often described as a key architect of M-Pesa, who at that time headed the corporate social responsibility group at one of the world’s largest mobile operators, the British telecom company Vodafone, went to Johannesburg for the UN World Summit on Sustainable Development. During a debate about how private businesses are usually not interested in innovating for low-income markets, a discussion with a British official prompted the use of funds from a government trust fund to circumvent such corporate restrictions.
Kenya, being one of the poorest countries in the world, fully met the design requirements.
There were 3 ATMs and 2.7 bank branches, 45% of people lived in dwellings made of mud or dung, kerosene was the main source of lighting for 76%, and electricity was available to less than 18% of the population, according to FSD Kenya. At the same time, one in five had a mobile phone, and Vodafone was the co-owner of Safaricom and its mobile operator in Kenya.
After Vodafone received a grant from the UK government’s Department for International Development, it launched a system in Nairobi, the capital of Kenya, to help people borrow microloans using a cell phone. However, it quickly became clear that people, most of whom came to the city to work, took out a microloan only to send the money to their families in rural areas, sometimes spending an entire day on a bus journey and risking being robbed. There was no other way to transfer the money: these people had virtually no access to financial services, and there were no banks in the villages.
The Fintech Revolution and the Kenyan Central Bank
There are several factors that played a role in the success of African fintech: the ease of registration in the mobile money systems, the limited access to banking services, falling prices for mobile devices and Internet connection (see the inset). M-Pesa has not been very successful in capturing markets where the level of public participation in banking services is already high or the financial sector is quite tightly regulated (for example, expansion into Albania and India has failed).
The Central Bank of Kenya decided not to object to the entry of the telecom operator into the financial sector, despite the indignation of local banks that the mobile operator acts as a bank without having the appropriate license.
Before launching M-Pesa, the Central Bank, together with Safaricom, assessed the possible risks of the project and took measures to protect users. It was decided that the service would operate with the support of the Commercial Bank of Africa, which would open trust accounts in parallel with the savings on the SIM card.
As a result, the banking business was separated from the Safaricom business, and if the operator had gone bankrupt, the funds of M-Pesa users would have been protected. Subsequently, the central bank developed additional regulatory measures that increased the confidence of M-Pesa customers, as well as continued to develop the mobile money market: for example, a maximum limit was set on the amount of transfers, which gradually increased as the service gained popularity and M-Pesa entered into agreements with other banks.
The banks subsequently either competed with M-Pesa (as Equity Bank, which created the virtual mobile operator Finserve/Equitel), or took advantage of cooperation with M-Pesa to strengthen their market position (as Commercial Bank of Africa, which launched the M-Shwari savings service with it).
As mobile money systems continue to expand across Africa, their influence is increasingly visible beyond financial services alone. Digital platforms are now closely linked with broader forms of online participation, including access to education, e-commerce, remote work, and government services.
One of the emerging aspects of this transformation is the growing importance of mobile identity and verification systems. As users engage with more international platforms and cross-border digital services, mobile numbers are often used as a primary method of authentication. This makes reliable and flexible mobile connectivity an important part of the wider digital infrastructure.
In this context, tools such as eSIM Plus phone number for verification reflect how mobile communication is becoming integrated into digital identity systems, particularly for users who operate across different platforms and regions.
Conclusion
The rapidly growing fintech sector in Africa attracts foreign investment. This sector accounted for 40% of all foreign investment in African technology startups, although the absolute figures are relatively small — about $285 million. The total volume of investments in local startups has quadrupled and reached a record $726 million for the region.
Fintech can be considered the main force capable of transforming the structure of the financial system in sub-Saharan Africa, according to the IMF. In addition, fintech often acts as a catalyst for innovation in other areas of the region’s economy: for example, in Tanzania, since 2012, farmers have been able to receive weather forecasts and market price reports on their phones using special mobile applications, and in Ghana, an online platform based on distributed ledger technology helps register land rights.
Title: From M-Pesa to Digital Identity: Africa’s Fintech Evolution
Description: A concise look at Africa’s fintech transformation, highlighting M-Pesa’s impact in Kenya, mobile money expansion, and how digital finance drives inclusion and innovation.
