Have you ever wondered how Yala's artisans get paid? After all, we work with artisans from Kenya — a country where the majority of informal sector workers are unbanked in the traditional sense.
While it may seem bizarre to those living in countries in Europe, the UK or the USA, billions of people around the world have no current or savings accounts. And in countries where there are no free banking options for citizens, workers have to get creative with how they handle their income.
That's where mobile money, pioneered in Kenya, comes into play.
Unbanked but relied upon
In many developing nations, citizens don't have access to free banking like we do. According to the World Bank, more than 1.6 billion people are unbanked, undermining their quality of life and holding back the economic development of their country.
In Africa, 50% of the population is financially excluded from formal banking. And in Kenya, where Yala works with local artisans, that number is still a staggeringly high 44%.
Kenya has a large informal economy –– people working outside of 'traditional' jobs that come with benefits, job security, and safety precautions. Many of these incomes are untaxed and 'under-the-table', further perpetuating the country’s unbanked practices.
This becomes even more of a problem when you consider the typical dependency network in Kenya and other developing nations. It's common for one person's income to support multiple groups of family members or neighbours. And, on average, one working adult in Kenya has six financial dependents.
That number is even greater for some of the Maasai women that Yala works with who, as a collective of 150 women, have a positive impact on 300 additional households in the area, due to family dependencies.
So how can we ensure a fair or thriving wage for unbanked workers on the other side of the world?
Obviously, we ensure that all our artisans are fairly compensated for the work they do for Yala. But when they're halfway around the world, with no access to a bank account, how is that even possible?
Did your mind go to PayPal? Don't forget, that needs to be attached to a debit card or an account. Western Union is ridiculously expensive and sending cash is too risky and slow (and all of it doesn't always get there).
So for artisans in Kenya and other African countries, the answer is right in their pocket...
Mobile banking empowers informal workers and helps encourage financial inclusion
Enter M-Pesa — a mobile phone payment service invented by network operator Safaricom, and launched in Kenya way back in 2007. "Pesa" means money in Swahili.
The original concept of the software was to allow for microloans to easily be borrowed and paid back. But when Kenyans started using M-Pesa to transfer money to each other, Safaricom pivoted the service to become a mobile banking tool that anyone could access.
It was designed as an e-wallet — a place to receive deposits and withdraw cash, execute bank transfers, pay bills, and receive salary payments.
In short, M-Pesa was a game-changer for unbanked citizens all over Kenya.
Why? Because while not everyone has a bank account, a huge proportion of the population has a mobile phone, no matter how basic. And even if the phone gets stolen, the mobile money wallet remains intact.
M-Pesa is a more secure, faster way to store and transfer digital money, with the option to handle cash via authorised M-Pesa agents. Better still, the number of M-Pesa agents far exceeds the number of bank branches in Kenya.
Did you know that Africa did mobile money first?
African countries are quick to adopt new advances, like mobile banking, because of the lack of any preceding option. The introduction of M-Pesa led to a huge surge in other mobile money services because there was such a need for this type of solution.
Now, approximately 144 mobile money providers operate in Africa, with companies such as M-Pesa, MoMo, and Orange Money accounting for a significant share of the market. And thanks to a new deal freshly inked by payments technology firm Flutterwave, more and more unbanked individuals are finally given a chance to take charge of their money.
M-Pesa's 41 million users made 12.2 billion transactions in 2020, and MoMo, another mobile banking company, has 35 million active users.
These numbers are nothing to sneeze at. Africa has more digital financial services users than anywhere else in the world, according to IMF, with some estimations putting them at nearly 50% of total global users.
And that’s what we call "leapfrogging" tech.
Now traditional banks are starting to sit up and pay attention
Over in Kenya, the country's central bank says 50% of the country’s GDP is now carried over M-Pesa, which is huge. M-Pesa has created significant positive change and shows the power that technology can play in changing the lives of citizens in developing nations.
Banks in Kenya hated M-Pesa, and other mobile banking, at first. But as it grew exponentially, banks had to get on board –– mobile money was seeing serious sums of money that would bypass banks entirely if they didn’t join forces.
Today in Kenya you can pay for everything with M-Pesa, from your utility bills all the way to fruit and veggies from a cart on the side of the road.
The recent adoption of cryptocurrency in African nations is being regarded as a parallel of how fast mobile money was embraced in the last decade. In places where people might not necessarily trust the national currency, they turn to other means of storing and spending their hard-earned wages.
Mobile money doesn’t fix everything — but it’s a great start for financial inclusion
Digital wallets are not a total solution to unbanked ways of living. There's still the issue of tax avoidance to consider, as well as the fact that mobile money lending has left some Africans struggling through debt. That said, M-Pesa has certainly created more opportunities for entrepreneurship and economic participation than would have been possible otherwise.
Banks targeted at low-income customers have also sprung up in the aftermath of the M-Pesa revolution, so the knock-on effect has been undoubtedly positive.
Financial inclusion is the way forward
Without M-Pesa and mobile banking, Yala would be lost.
Our ethical values and determination to pay artisans a thriving wage are reinforced by this ability to pay them directly. It takes fewer than five minutes to send money from the UK to Kenya, the artisans are not charged any fees to receive it, and the money goes right from the Yala bank account to their M-Pesa mobile accounts.
It's fully transparent, with no middlemen. And we can ensure that the artisans are paid fully for their work and are never out of pocket.
That's the part that matters the most because in the informal sector, every single penny counts –– or in this case, every shilling.