KAHARA VILLAGE, KENYA — The wife of a cow herder recently switched on a light in her home for the first time ever, all thanks to a mobile phone.
Rokoine Tipanoi used the mobile phone in November to make a tiny down payment on a solar panel on her roof that provides electricity to her home. The payment was so small, in fact, that it is cheaper to light her room now than it was to fill her old kerosene lantern.
Hundreds of thousands of such payments have allowed a Kenyan startup called M-Kopa to build a business, one light bulb at a time.
“Now I have two lights, instead of one lamp. And I can charge my phone,” Ms Tipanoi said of the new solar panel she snagged for a $30 deposit and daily fees of 40 Kenyan shillings, or less than 50 cents.
Across Kenya, mobile money is breathing life into micro business. Companies whose business models are based on mobile payments have shown how targeting some of the world’s poorest customers can not only pay but also be a promising way to grow. Small digital transactions are fuelling new ventures, from insurance to loans, and pointing the way for other companies that want to reach the global poor, or the “bottom billion”.
“The mobile phone made the bottom of the pyramid viable as a business opportunity,” said Aly Khan Satchu, who runs a Kenyan investment firm. “If you’re taking a dollar off a million people, that’s a reasonable revenue stream, but it wasn’t possible to do that without the mobile phone.”
Another company called Kopo Kopo, founded by two Americans, sells a product that allows informal retailers to accept digital payments, and then to computerise their bookkeeping.
A Kenyan-American venture called M-Changa gives extended families a phone app to raise money for weddings and funerals — the type of events that draw support from an entire Kenyan village. And Kenya’s UAP Group insurance company insures small farmers, and compensates crop failures via mobile payments based on satellite weather data, sometimes before the crops fail.
Mobile money users load cash onto their phones by handing it to agents stationed at grocery stores, petrol stations and shopping centres. They receive a text message with their balance and then they can send money to another person or to a company via text message. A bank account is not needed.
Africa’s emerging middle class — estimated at 350-million — has become a focal point for multinationals operating on the continent. But Africa’s poor haven’t figured in many boardroom discussions, largely because they can’t afford much of what foreign companies sell and the continent’s poor roads make them hard to reach.
Africa, nonetheless, is a key testing ground for microbusiness models. About 70% of the global poor live in Africa. Sub-Saharan Africa’s gross national income was $1,657 per capita in 2013, according to the World Bank. Cue the humble cellular phone.
About 65% of households in sub-Saharan African had at least one mobile phone in 2013, and the region is the world’s fastest growing mobile-technology market, according to Gallup data.
Most of these aren’t smartphones, but low-price phones that customers load with a few dollars at a time to use for calling and text messaging. Some of the poorest customers use only text messages, because they are cheaper.
For those companies that do want to reach the continent’s most price-sensitive consumers, Kenya has become a useful launching pad.
Back in 2007 Kenya introduced one of the world’s first mobile-phone payment systems, called M-Pesa after the Swahili word for money. Digital payments are now so common that everyone from day labourers to grandmothers send money across the country via phone.
Kenyans pay for groceries at checkout by tapping on their phone and avoid trips to the electricity company by paying for power via mobile money. Some doctors even accept M-Pesa as payment — all via simple text messages.
M-Kopa co-founder Jesse Moore, a Canadian, saw an opportunity to go beyond payments to financing and settled on solar panels as the best vehicle for that business. Swaths of Kenya are off the power grid, meaning that about 35-million ordinary Kenyans depend on kerosene lanterns for light and car batteries to charge cell phones.
Mr Moore first came to Kenya to help launch M-Pesa for mobile provider Safaricom, in which Vodafone Group has a minority stake. He returned in 2012 and founded M-Kopa with two business partners, in a bet that mobile technology would open up opportunities.
“We believed there would be businesses built on the back of mobile payments and we wanted to be part of that,” Mr. Moore said.
The partners had to design a secure system that tied the solar panel to a prepaid meter. But Mr Moore said the most difficult part was setting up the business so that buying a solar panel appealed to a consumer who couldn’t even afford a modest increase in the price of milk.
M-Kopa set their sales agents loose in some of the country’s poorest areas because they were determined to succeed at tapping what appeared to be a neglected market. In some cases, even the refundable deposit of about $30 is too expensive, according to Jackson Lekanayia, a sales agent for the area about an hour’s drive from Nairobi that includes Kahara village.
“Sometimes they say they don’t have the money right now, so I give them a flier,” Mr Lekanayia said. “Usually they call back in a few weeks or a month and they have the money.
“Ms Tipanoi, who in November saw electric light inside her home for the first time, found the money for the down payment through sales of beaded necklaces. She could never afford torch batteries — much less a solar panel — but when she saw a sample solar panel setup from M-Kopa during a weekly trip to a nearby market town, she arranged for the small daily payments.
It takes about a year of daily payments to pay off the eight-watt panel. Now, there’s ample light to cook in the evenings. Her two teenage children are able to study without kerosene smoke filling the house. And for the first time in her life, 52-year-old Ms Tipanoi owns a torch — it charges off the solar panel by day and lights her way along village paths at night.