A Success Story: How Platforms Like M-Pesa Are Changing Commerce In Africa?

When futuristic Hollywood sci-fi films and rapid rotations of iPhone models constantly influx our reality, it’s not hard for an average human living in the 21st century to imagine a future where the cash system has become passé. Imagine going to dinner with friends and  instead of fumbling through the wallet for the right amount of dollar bills or collecting a tray full of seven credit cards, a simple few swipes on the phone will do the trick. It’s the future of mobile money. 

Well, that has become the reality of sub-Saharan Africa, one of the earliest mobile money adopters in the world. Since 2012, mobile money– aka. digital payments – are emerging as the leading finance system in over ten African countries like Kenya, Tanzania, and Ghana. Launched in 2007, M-Pesa, a phone-based money transfer service developed by Safaricom, Kenya’s major telecommunication firm, has transformed day-to-day payments, moved money from mattress to virtual account, and brought millions into the formal banking system. The continent that still struggles to provide clean water, electricity, and basic infrastructure to the majority of its population has beaten Silicon Valley in embracing digital transactions.

There are a lot of reasons that can account for the explosion of mobile money in Africa. From the moment cellphones entered the mass market around the early 2000s, mobile phones have become ubiquitous in Africa as the continent skipped over the landline. A vast majority of phones were the basic $25 models, and all apps work via SMS with a wide reach, creating the potential market for virtual transactions. In Kenya, nearly all households owned a mobile phone. Yet, what wasn’t ubiquitous is a highly accessible banking system. Kenya had one ATM for every 18,000 people – comparatively, the number was one for every 740 in the U.S.– and more than 75 percent of the sub-Saharan African adult population had no bank accounts as of 2011, the year when M-Pesa started to ascend to popularity. Mobile money provided life-changing alternatives to countries that poorly manage the flow of cash. 

Before mobile money, money transfers had been a problem in countries like Kenya. Despite a growing number of city workers who wish to send money to families and relatives in the rural area, the methods to do so remain limited, unsatisfactory, and often delayed. People could buy a money transfer at a bank, which takes multiple days to process and requires the recipient to travel to the nearest town to retrieve it, or press an envelope of cash to a friend or a bus driver who happens to be heading home. Often, the money either didn’t reach the recipient, or it was less than the intended amount. For millions of informal-sector workers who have no checking or savings account, no credit card, money transfers were difficult, and the cash economy tended to lock people in poverty. 

The genesis of mobile money changed the game. Platforms like M-Pesa, Orange Money, MTN Mobile Money, EcoCash, Tigo Cash altered the way Africans interact with each other economically, granting access and opportunities to rural communities that were often under-developed. For a small fee, mobile money could be sent to any other phone number in the same network, and people could easily withdraw the digital balance in cash from a local agent. Instead of face-to-face interactions, payments and collections of debts turned virtual as daylong queues to pay utility bills disappeared. As of 2012, 86 percent of Kenya’s mobile phone owners used some form of mobile money. In 2013, daily transactions on M-Pesa amounted to approximately $35 million, making up more than a quarter of Kenya’s GDP. Access to M-Pesa not only created robust consumptions that stimulated the economy, it also lifted 194,000 households, around 2 percent of the country, out of poverty. Before mobile money, the rural populations who didn’t live near banks lacked credit histories and collateral to own bank accounts. M-Pesa brought millions into the formal banking system by introducing an alternative called M-Shwari, a bank that offers basic saving accounts and allows the users to earn credits by, for example, paying the water bill on time. 

Mobile money is pushing countries like Kenya forward by providing a public safety net and pushing female financial independence. Since the M-Pesa was first introduced, it has been the public’s emergency cushion. When disasters happen, if a child needs medicine or a car breaks down, people can reach out for help anywhere in Kenya through the platform. M-Pesa also encourages female independence. According to a recent study, it improved the lives of many female-headed households, helping women graduate from subsistence agriculture to small businesses. Having an M-Pesa account gives a woman agency to control her finances, rather than depending on her husband or parents. In the long run, mobile money might be the key to a modern Africa. 

By facilitating commerce and introducing millions of people into the formal banking system, mobile money transforms Africa’s major payment venues onto digital platforms and pulls rural areas out of poverty. In a continent used to making do with little, African countries embrace mobile money as a radical leap of faith into the future. And it may be working out just fine. 

A Growing Threat: Piracy in The Gulf of Guinea

Piracy in the Gulf of Guinea has been an ongoing and growing threat to maritime trade in the region rivaling and even growing larger than piracy off the coast of Somalia. The growing threat of piracy prompts more direct action that needs to be taken to address the root causes of the issue, that is, a lack of jobs for the natives in the region’s most at risk of becoming pirates, a plan to reduce political corruption, and a strict plan to quell the current threats.  While the world has seen a general decrease in maritime piracy, West Africa has seen an increase primarily in the Gulf of Guinea making it the worst area in the world affected by this form of piracy. The Gulf of Guinea (see link for image) stretches from Senegal to Angola, covering over 6,000 km of coastline. Two regions form its 20 coastal states, islands and landlocked states and is what comprises West Africa and Central Africa. The Gulf of Guinea is of geo-political and geo-economic importance for the transport of goods to and from central and southern Africa. Additionally, it is a choke point for the African energy trade, with intensive oil extraction in Nigeria’s Niger Delta (see link for image). The Niger Delta is a densely populated region responsible for some two million barrels a day and is a target of pirates looking to make a quick sum from the theft of oil and oil barrels. 

80% of all global trade is carried by sea, Most pirate attacks in the Gulf of Guinea target oil and gas tankers, but fishing boats are targeted on occasion. The International Maritime Bureau says “the vast majority of sailors kidnapped for ransom were taken off the coast of Benin, Cameroon, Guinea, Nigeria, and Togo”. In its report on the growing threat of piracy off the coast of West Africa the International maritime Bureau noted “195 incidents of piracy and armed robbery on ships worldwide in 2020, compared to 162 the previous year”. The Gulf of Guinea accounted for more than 95 percent of abductions in the Bureau’s January report. The additional worry spreading about the West African pirates, besides their growing numbers and frequency of attacks, is their brutality and penchant for violence. In a 2013 report by three leading organizations in the study of maritime piracy, it was found that “while sailors attacked in the Gulf of Guinea in the west spent far less time in captivity than those held in Somalia, they were at risk of much greater violence”. West African pirates were found to be more motivated by quick profits from selling hijacked cargoes of refined oil compared to their Somalian counterparts who sought lucrative ransoms and held captives for much longer periods of time. 

The root cause for piracy in the Gulf of Guinea comes from desperation, lawlessness and political radicalism. Extreme poverty and a lack of options are oftentimes the main causes for piracy, as most pirates come from remote towns and tribes with hundreds living in abject poverty with very few options for providing for themselves or their families and communities. Extreme poverty and a lack of options are reasons for piracy throughout the countries whose coastline lies on the Gulf of Guinea. This is true for none more so than Nigeria and the Niger Delta, the largest source of pirates and piracy in the Gulf of Guinea. While the Delta might produce most of the oil from Nigeria, its economy is underdeveloped and there are limited jobs for the local populace as well as rampant corruption within the government and military allowing for groups of pirates to survive. Reports have stated that “once some pirate vessels are arrested by low rank officials, important military exponents intervene to order their release”. 

Piracy interferes with the legitimate trading interests globally and of countries local to the region that include Benin, Togo, Côte d’Ivoire, Ghana, Nigeria, and the Democratic Republic of Congo. For example, trade of Benin’s major port, the Port of Cotonou, was reported in 2012 to have dropped by 70 percent. The cost of piracy in the Gulf of Guinea has been estimated to be about $2 billion

Many organizations are looking for methods to try and fight the growing number of pirates. But to complicate matters, pirate attacks in West Africa mainly occur in territorial waters, terminals and harbors rather than on the high seas. This has hindered any intervention by international naval forces like the UN and EU. However, to counter one of the root courses, that is corruption, the Nigerian government has implemented some counter corruption measures, but the corruption is still so widespread that the government is still unable to fully restrict it. Conversely to the situation in Nigeria, Ghana has seen a comparative decrease in privacy thanks to continued operations by local coast guard and navy forces. And in Somalia reports indicate that “fewer pirate groups were operating from bases in Somalia because of increased patrols by international navies and more effective security measures on ships”. The UN has been a major proponent in the countering currently and prevention of piracy in the Gulf of Guinea. The UN council focusing on efforts in the Gulf of Guinea also encouraged “States in the region and regional and international partners to make fully operational all the regional counter piracy mechanisms and urged partners to continue assisting States of the Gulf of Guinea”. 

The threat of piracy in the Gulf of Guinea continues to grow and spread. To counter this not only do armed forces need to be successfully and effectively deployed throughout those waters, but local officials must address their own corruption. They must hold themselves accountable and properly deal with the pirates swiftly and subsequently direct attention to the Niger Delta and its intense poverty to hopefully end the outflow of piracy at the source. They must look to  examples like Ghana and Somalia as both countries continue to suppress piracy in their region. This process will be slow but must begin and continue onward for the sake of Nigeria, but also its neighboring countries as well.