Kenya – mayo615

Facebook’s Libra and Safaricom’s M-Pesa

Are the similarities mere coincidence and competition, or is a global mega-corporation exploiting a successful Kenyan enterprise without collaboration or compensation?

Since Facebook announced its new Libra currency and mobile payments scheme, the global reaction has been very mixed. Libra is not truly a cryptocurrency though it will use blockchain. It will be pegged to a reserve currency, which cryptocurrencies are not. Libra will “potentially” be governed by an association independent of Facebook, though that association remains non-binding and sketchy at this point. Potential regulatory issues abound around the World, and Facebook is currently not viewed very favorably by many governments. But most interesting to me, Libra appears to be modeled after Kenya’s M-Pesa mobile payments system, the world’s leading mobile payments system, invented by mobile carrier Safaricom. Then I asked myself if Facebook, knowing that it needs to move away from selling personal data, has seized on Safaricom’s M-Pesa as its new revenue model.

More disturbing to me, I asked myself if this might possibly be an example of Western mega-corporate exploitation of a smaller enterprise in the developing world. I have heard no reference whatsoever to M-Pesa from Facebook. In similar situations in high tech, the mega-enterprise would typically acquire the intellectual property of the smaller company, hire its founders and employees to gain market advantage. This is often called an “acqui-hire.” Even without IP, it can be done to simply ensure a positive brand image transaction.

Four years ago, in 2015, Facebook With apparent good intentions, and also a good dose of Facebook business strategy, struck out to promote Free Basics, a free limited Internet for the poor in less developed countries sponsored by Facebook and its local telecommunications partners. India was a prime market focus. While on the face of it Free Basics seemed to have merit, Zuckerberg ran into a wall of opposition. On close inspection of the details, Facebook’s problem, despite all of its global corporate sophistication, appeared to have been naïveté about the foreign markets it was trying to enter. International business is strewn with case studies of corporate arrogance and ignorance that led to failure. Zuckerberg could have looked no further back than 2013 for clues from Google and Eric Schmidt, who also failed in India, as to why Facebook failed. The Indian government viewed both Facebook and Google with the same suspicion that they had for the Raj in 1947.

I do not have all the answers yet about Libra and M-PESA, and other mobile carriers have also entered the mobile payment market, but at this point, I have deep reservations about Facebook’s failure to acknowledge its role and its responsibility to Safaricom and M-PESA. IMHO, questions need to be raised directly to Facebook.

A bit of history from The Economist:

Why Does Kenya Lead The World In Mobile Money?

A convergence of factors, some of them accidental, explain Kenya’s lead

Source: Why does Kenya lead the world in mobile money? – The Economist explains

The Economist explains

From March 2nd, 2015:

PAYING for a taxi ride using your mobile phone is easier in Nairobi than it is in New York, thanks to Kenya’s world-leading mobile-money system, M-PESA. Launched in 2007 by Safaricom, the country’s largest mobile network operator, it is now used by over 17m Kenyans, equivalent to more than two-thirds of the adult population; around 25% of the country’s gross national product flows through it. M-PESA lets people transfer cash using their phones, and is by far the most successful scheme of its type on earth. Why does Kenya lead the world in mobile money?

M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash and thus making possible lower interest rates. But after pilot testing, it was broadened to become a general money-transfer scheme. Once you have signed up, you pay money into the system by handing cash to one of Safaricom’s 40,000 agents (typically in a corner shop selling airtime), who credits the money to your M-PESA account. You withdraw money by visiting another agent, who checks that you have sufficient funds before debiting your account and handing over the cash. You can also transfer money to others using a menu on your phone. Cash can thus be sent one place to another more quickly, safely and easily than taking bundles of money in person or asking others to carry it for you. This is particularly useful in a country where many workers in cities send money back home to their families in rural villages. Electronic transfers save people time, freeing them to do other, more productive things instead.

Dozens of mobile-money systems have been launched, so why has Kenya’s been the most successful? It had several factors in its favour, including the exceptionally high cost of sending money by other methods; the dominant market position of Safaricom; the regulator’s initial decision to allow the scheme to proceed on an experimental basis, without formal approval; a clear and effective marketing campaign (“Send money home”); an efficient system to move cash around behind the scenes; and, most intriguingly, the post-election violence in the country in early 2008. M-PESA was used to transfer money to people trapped in Nairobi’s slums at the time, and some Kenyans regarded M-PESA as a safer place to store their money than the banks, which were entangled in ethnic disputes. Having established a base of initial users, M-PESA then benefitted from network effects: the more people who used it, the more it made sense for others to sign up for it.

M-PESA has since been extended to offer loans and savings products, and can also be used to disburse salaries or pay bills, which saves users further time and money (because they do not need to waste hours queuing up at the bank). One study found that in rural Kenyan households that adopted M-PESA, incomes increased by 5-30%. In addition, the availability of a reliable mobile-payments platform has spawned a host of start-ups in Nairobi, whose business models build on M-PESA’s foundations. Mobile-money schemes in other countries, meanwhile, have been held up by opposition from banks and regulators and concerns over money-laundering. But M-PESA is starting to do well in other countries, including Tanzania and Afghanistan, and last month it was launched in India. At the same time, operators in some other countries are doing an increasingly good job of imitating it. Some of the factors behind Kenya’s lead cannot be copied; but many of them can, which means it should eventually be possible for other countries to follow Kenya’s pioneering example.

The Enactus UBC Faculty of Management Leadership Team. Left to right front row: Stormy Johanson, Adam Prarie, Julia Moody (President)

Left to right back row: Jesse Shopa, Joey Gidda, David Mayes (faculty advisor), Chris Janiewicz

The formation of the University of British Columbia (UBC), Faculty of Management chapter of Enactus occurred only three months ago, under the guidance of Dean Roger Sugden, but the Enactus student leadership team has already attracted nearly two dozen members, all of whom, including the leadership will return next year, to build the organization for handoff to future Faculty of Management students. Meanwhile, many of our current Enactus members will be off to destinations around the World for the summer.

The Enactus Canadian national organization encouraged us to get out there and just start “doing something” rather than debating the chapter’s by-laws and getting bogged down in meetings. The team did exactly that, and have already conducted a local food drive that collected over a quarter ton of grocery items prioritized by the Kelowna Food Bank, in only four hours.

The Enactus FOM team have also introduced themselves to the Enactus team at Okanagan College, and observed OC‘s dress rehearsal presentations for the Enactus national competition to get an idea of what we need to do next year.

The global impact and reach of Enactus was made evident to us this week when I was contacted by Doina Olaru, the Enactus faculty advisor from the University of Western Australia in Perth, who is currently on the UBC Okanagan campus conducting research. Doina had somehow found out about me, and asked to meet. I quickly arranged for her to also meet with our student leaders. We were all left in awe by Doina’s story of what she and her students had accomplished in five short years with limited funding. The UWA Enactus team are three time Australian national champions for their projects, and have also appeared at the Enactus global conference. In addition to creating domestic Australian projects, the UWA team have created award winning projects in Kenya, India and Ghana, all in less than 5 years. Needless to say, our team hope that we can have a bit of their success rub off on us, and we have plans to build our relationship with Doina and to meet her team, as two of our UBC team will be Going Global in Australia very shortly.

Our most important early development has been the emerging plan for a major “Tier Three” project. Tier Three Enactus Projects are those which provide ongoing benefit to the community over multiple years, engage and employ a significant number of local community people in need. In discussion with our Enactus national field director in Toronto, we learned that of the 63 Enactus chapters at universities across Canada, there are only 2 chapters currently with Tier Three projects. The Enactus national organization is obviously very eager to increase this number. We have shared our early conceptual ideas with the national Enactus organization and they are very enthusiastic and supportive. For now, our Tier Three project remains under wraps while we do our “due diligence” and seek the endorsement of our key stakeholders, and community organizations who will also need to support the project. We are hopeful that we can begin early piloting of our Tier Three project over the summer.

Finally, we have reached out to the community for financial support and we are well on our way to obtaining those local community partnerships.

For further information and to join our local Enactus chapter, contact Julia Moody’s mobile 250-801-6402 or mine: 250-864-9552. Or email us at enactusubco@gmail.com.

ABOUT ENACTUS.

www.enactus.org

A community of student, academic and business leaders committed to using the power of entrepreneurial action to transform lives and shape a better more sustainable world.

entrepreneurial—having the perspective to see an opportunity and the talent to create value from that opportunity;

action—the willingness to do something and the commitment to see it through even when the outcome is not guaranteed;

us—a group of people who see themselves connected in some important way; individuals that are part of a greater whole.