While credit has taken over in most developed countries, in third world cash based economies, the idea still too popular. In these countries, it is too easy to just disappear and leave you debts unpaid. In Kenya, the cell phone provider Safaricom has come up with a sort of credit type system. It is called M-Pesa, which literally means “money”. The best way to describe this system is a prepaid credit system. As a bit of a background, the way that cell phone service works in Kenya is much different than the way that it works in the United States. Here, for the most part, we have a post-paid cell phone credit system. A majority of us have signed contracts that we pay every month for a certain amount of talk time. In Kenya, the system is completely different. Generally, you buy scratch cards that are worth a certain amount of credit, and add those cards to your account. Then, you can use that credit to call other people. Well, with this large network of scratch card sellers around the country, the infrastructure of a banking system was already in place. Now, with the M-Pesa system, you can add cash to your cell phone account by depositing it with any of the M-Pesa authorized agents around the country. Then, to use the cash in your account, you can send money through an M-pesa text message to anyone with an M-Pesa account. The money is deducted from your account, and deposited into their account. You can use M-Pesa to purchase a variety of items in Kenya, and at one point, I saw someone use it to buy a taxi ride. In this way, the M-pesa system is like a pre-paid credit system.
Recently, I just found out that Safaricom has come up with another system called M-Kesho (literally Tomorrow) that links your M-Pesa account to a physical bank account, and even gives its users access to microcredit. Sounds like a great system to me!