Introduction
This paper discusses the influence of the telecommunication company M-PESA on Kenya’s local economy. M-PESA is a service that gives opportunities to send and receive money globally (M-PESA, 2022). This service is easy to use because it requires minimal personal information and access to mobile phones for financial transactions. In fact, even a phone without a touchscreen and internet access can be used to create and pay bills. The major problem is that existing academic literature lacks a systematic study of the impact that Vodafone’s entrance, a British telecommunications company, had on the Kenyan market. The existing studies will be presented in the literature review section, which introduces the phenomenon of M-PESA, but does not comprehensively address Vodafone’s direct investment.
The research question for this study is “How is Vodafone continuing to grow in Kenya, and what impact is this having on the local economy?” In practice, this paper will be extensively descriptive because, without this knowledge, it would be difficult to formulate hypotheses for testing in the future. Therefore, the study’s objective is to draw academic attention to how the investment of telecommunication companies in a developing country may influence the growth of the local economy.
The thesis is that the advent of easy-to-use mobile banking, facilitated by direct investment from foreign companies, may influence changes in people’s well-being, as seen in Kenya. This paper will begin with a literature review to discuss the fundamental qualities of M-PESA. The methodology and potential findings will then be addressed.
Literature Review
Mobile Money in Sub-Saharan Countries
Nowadays, more and more people prefer having their mobile money in a mobile application instead of using bank cards and bank accounts. Theoretically, mobile money is “a tool that allows individuals to make financial transactions using cell phone technology” (Jack & Suri, 2011, p. 1). These technologies allow people to communicate globally through a mobile connection.
The larger-scale change brought about by the advent of mobile phones affected people in sub-Saharan Africa, where, prior to the introduction of mobile phones, the cost of communication was prohibitively high (Jack & Suri, 2011). The opportunity to transfer money through mobile banking and broader opportunities for connection created a more prospective financial environment. Thus, this new, lighter money delivery system has benefited Third World countries most, especially those in the sub-Saharan region.
The Advent of M-PESA: Context
For a deeper understanding of why the topic of M-PESA was chosen, it is necessary to elaborate further on the context of M-PESA’s establishment. In March 2007, the British telecommunications company Vodafone, using donor-funded money for its pilot project, launched a new mobile phone-based payment service called M-PESA (Jack & Suri, 2011). Mbiti & Weil (2011) highlight the immense popularity of M-PESA from the day of its inception. By September 2009, after almost 2.5 years from the start, there were 8.5 million Kenyan users, and US$3.7 billion were transferred through M-PESA systems (which constitutes 10% of Kenyan GDP) (Mbiti & Weil, 2011).
Admitting this influence, Mbiti & Weil (2011) indicate that the M-PESA service has led to “enormous changes in the organization of economic activity, family relations, and risk management and mitigation, among other things” (p. 3). Thus, it is not debatable to assume that Vodafone’s direct investment greatly influenced the development of the Kenyan people’s well-being.
Another aspect that should be discussed is M-PESA’s influence on other mobile banking companies in Kenya. Before the introduction of M-PESA, PostalPay, Western Union, and MoneyGram dominated the market in Kenya (Mbiti & Weil, 2011). In 2009, the financial statements of these companies indicated a rapid decline in revenues and the number of users (Mbiti & Weil, 2011).
The primary factor contributing to the failure was the lack of convenient mobile technologies that M-PESA had. For most Kenyans, the services of these companies were not accessible, as even the presence of a mobile phone did not enable them to use the functions of these companies effectively. After M-PESA’s competitors realized the dangers of Vodafone’s investment in Kenya, they started lobbying the Kenyan government to restrict the operation of M-PESA. Still, they have collaborated to make mobile banking services in Kenya more convenient (Mbiti & Weil, 2011). Therefore, the context around M-PESA was favorable for them because competitors fully realized their position as non-dominant services.
Advantages for Kenyan People
Lastly, it is necessary to discuss in detail the impact of M-PESA activity on the Kenyan economy. The more efficient transfer of money in Kenya improved the state’s economic conditions (Hayward, 2020). For example, Jack & Suri (2011) noted that it had become significantly easier for households to pay electricity bills because there was no longer a need to travel long distances to remote offices.
Similarly, taxi drivers did not have to carry large amounts of cash during work (Jack & Suri, 2011). In addition, it had become easier for Kenyan people to save money because, previously, it was dangerous to store cash in households (Jack & Suri, 2011). Therefore, although numerical designations of economic growth in Kenya are not available, some facts about life improvement in Kenya can illustrate changes.
Methodology and Research Design
Having become familiar with the basic information about M-PESA’s activities in Kenya, the next step is to consider the design of future work. As mentioned, its primary purpose is to examine how Vodafone’s direct investment in the local economy affects economic growth. Firstly, the original research will include a section with theoretical data on how, in general, direct investments of foreign corporations in developing countries affect the economy’s growth. This theory will not always be tied to specific cases; however, much attention will be paid to economic theory and research.
After presenting the theory, hypotheses about how Vodafone has affected Kenya’s economic growth will be formulated. This will be done to set certain expectations for future empirical research. However, these hypotheses will not be tested by quantitative methods. The methodology used in future articles will not provide an opportunity to test the hypotheses thoroughly. On the contrary, empirical research will help partially confirm or partially refute hypotheses and further direct research in the right direction.
Discussing the particular method, it seems that it will be similar to a case study combined with some traits of process tracing. Process tracing is used within the case to determine the causal mechanisms and inferential leverage that have influenced (Beach & Pedersen, 2019). In the case of investment in Kenya, process tracing can help trace the development of the Kenyan economy because of the entrance of foreign companies. The study’s results will dive into the ultimate results of process tracing, where statistics, articles from newspapers, financial statements, and NGO studies will be used.
The possible limitations relevant during the study’s implementation are related to Kenya’s under-researched political and environmental environment. Kenya has various languages and cultures, so conducting interviews with non-English speakers will be almost impossible. Because of this, it will be hard to understand the motives and motivations of those who did not use mobile banking and mobile services. This fact is more important because of the lack of books and articles on Kenya’s current affairs.
Conclusion
To sum up, this paper is concerned with the direct investment of the British company Vodafone into the mobile banking project in Kenya. These investments heavily influenced Kenya’s economic development, so it is essential to discuss this case in detail. This research proposal presents a paper that will discuss two aspects: the influence of Vodafone’s investments on the Kenyan economy and the further investment program, including the telecommuting company M-PESA. The methods that will be used are similar to the combination of a descriptive case study with elements of process tracing. This study is crucial because it can be the driver for discussing investments in Third World countries in general.
References
Beach, D., & Pedersen, R. B. (2019). Process-tracing methods: Foundations and guidelines. University of Michigan Press.
Hayward, C. (2010). Kenya: M-Pesa miracle. Euromoney. Web.
Jack, W., & Suri, T. (2011). Mobile money: The economics of M-PESA. National Bureau of Economic Research. Web.
Mbiti, I., & Weil, D. N. (2011). Mobile banking: The impact of M-Pesa in Kenya. National Bureau of Economic Research. Web.
M-PESA. (2022). Africa’s most successful mobile money service. Web.