1 Introduction
Financial inclusion is a key feature of the global development project and is promoted as an instrument for sustainable growth contributing to attaining to the UN's Sustainable Development Goals (SDGs).Footnote 1 International organisations, governments, donors and corporations increasingly acclaim the use of digital platforms for facilitating access to formal financial services, particularly in countries of the Global South with limited infrastructure and resources. For instance, the G20 Principles for Innovative Financial Inclusion, adopted following the 2008 financial crisis, strongly support the idea of financial innovation through new forms of financial-service delivery that are capable of reaching the excluded via routes such as branchless banking and payment services available through postal and retail outlets and shops.Footnote 2 Such digital financial platforms rely on institutional arrangements between different actors and offer those excluded from the mainstream banking infrastructure affordable and secure access to formal financial services.
One of the most-discussed digital financial-inclusion platforms to date is Kenya's M-Pesa – a mobile-phone-enabled money-transfer system established via a public–private partnership between the UK's Department for International Development (DFID), Vodafone and Vodafone's local partner, Safaricom. Since its launch in 2007, M-Pesa has grown at a phenomenal rate to reach over 70 per cent of the Kenyan population across the geographical, socio-economic and gender divides.Footnote 3 A key element in this rapid expansion has been the Central Bank of Kenya (CBK)'s ‘test and learn’ approach to its regulation, adopted to supervise the platform while remaining open to new providers and products. This approach has been acclaimed as a successful regulatory practice for digital financial inclusion.Footnote 4
This paper examines the role of regulation in the development of digital financial-inclusion platforms by focusing on the case of M-Pesa in Kenya. Bridging socio-legal enquiry and feminist political economy analysis and drawing on insights from law and development and post-colonial scholarship, it illustrates M-Pesa's inclusionary regulatory arrangements and analyses their implications for gender equality.Footnote 5 While gender equality, often simplistically equated with the number of women with access to financial services, is promoted as a key objective of digital financial inclusion, this analysis calls into question the same rhetoric of financial inclusion in development discourse. The gender aspect of digital financial inclusion is both relevant and revealing, not only because women have predominantly been portrayed among the financially excluded for various historical, structural and regulatory reasons, but also because an investigation of gender relations can help with recognising and examining the social, economic and legal elements that determine and reproduce financial exclusion.Footnote 6
The first section provides an overview of the relationship between gender, development and financial inclusion, examining how colonial norms contributed to the financial exclusion of women and how the development project has progressively aimed at their ‘conditional’ inclusion in the financial system. The analysis traces the shift from microcredit to microfinance to digital financial inclusion, highlighting the increasing involvement of the private sector in development interventions. The second section discusses the making of M-Pesa's inclusionary infrastructure, focusing on its regulatory arrangements and how these have contributed to financial inclusion while expanding the mobile-money market to areas typically outside the purview of financial markets. The third section examines the articulation of M-Pesa's regulatory arrangements and the gender implications of the projects, products and services built on its infrastructure. It shows how the M-Pesa platform has been used to provide fee-based and debt-based access to fundamental resources and services such as health care and electricity, often exacerbating gender inequality by charging women with the responsibility for transforming the opportunities that M-Pesa offers into improved livelihoods for themselves, their households and their communities.
This paper argues that, although digital financial platforms such as M-Pesa are promoted as instruments for economic and social development, they are regulated according to a logic of opportunity rather than a politics of redistribution, creating a secure source of profit for the institutions involved in the digital financial-inclusion business without redistributing the income and funding deriving from its development to benefit the financially excluded. While the lenient regulation of digital financial platforms can contribute to increasing the number of women with access to financial services, its institutional arrangements fail to use M-Pesa's revenue to address the gendered social and economic disadvantages that cause financial exclusion in the first place.
2 Gender, development and digital financial inclusion
The law plays an important role in defining the socio-economic conditions that determine both financial exclusion and the barriers to accessing financial services. The SDGs encourage reforms ‘to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources, in accordance with national laws’ (UN SDG Goal 5A, on gender equality).Footnote 7 The World Bank report, Women, Business and the Law 2016: Getting to Equal (2015, p. 17), points out that law, regulation and policy should facilitate women's access to credit and other financial services as a key factor for gender equality. International organisations including the UN, the International Monetary Fund (IMF) and the World Bank as well as governments, corporations and donors present financial inclusion as a precondition of women's autonomy and future well-being that helps them to cope with a lack of resources and unexpected events, engage in productive activities and juggle paid and unpaid work (Allon, Reference Allon2014). In addition to these benefits, digital financial platforms have been acclaimed as a way of overcoming the limitations of cash, increasing women's security and efficiency and, in the long term, improving their own, their communities’ and their countries’ well-being, in line with the Gender Equality as Smart Economics narrative (World Bank, 2006; 2012).Footnote 8
To understand the nexus between financial inclusion and gender equality in development discourse, however, it is important to clarify how the laws and regulations introduced during the colonial era created key conditions for gendered financial exclusion. As this paper is concerned with digital financial-inclusion platforms in Kenya, the main focus of analysis is on sub-Saharan Africa. Okeyo (Reference Okeyo and Oyewumi2005) points out that, while, under colonialism, men and women shared a similar subordinate structural position in relation to the dominant Western countries, colonial rules had a differential impact on women and men, and affected the relationship between them. First, the commodification of land and the introduction of property rights favoured men, who gained the status of household head (Manji, Reference Manji2006; Maathai, Reference Maathai2008; Federici, Reference Federici2011). Second, the introduction of the wage economy targeted men as paid workers and family breadwinners, relegating women to the position of secondary workers (Boserup, Reference Boserup1970; Manji, Reference Manji1999; Okeyo, Reference Okeyo and Oyewumi2005), framing them as dependent on men and mainly responsible for unpaid social-reproduction work. Social reproduction refers to the social relations, processes and labour that go into the daily and generational maintenance of the population (Katz, Reference Katz2001; Picchio, Reference Picchio2003; Bakker and Silvey, Reference Bakker and Silvey2008) and involves ‘the provision of material resources (food, clothing, housing, transport) and the training of individual capabilities necessary for interaction in the social context of a particular time and place’ (Picchio, Reference Picchio2003, p. 2).
Third, customary laws, filtered according to colonial values via the repugnancy clause, facilitated the subordination of women in areas such as property rights and domestic and family law including marriage, divorce, inheritance, and land and burial rights (Stamp, Reference Stamp1991; Juma, Reference Juma2002; Banda, Reference Banda2003; Ocran, Reference Ocran2006).Footnote 9 Women became adversely affected by customary systems, as they were not allowed to own or even inherit property and capital, which they needed in order to access formal finance (Guyer, Reference Guyer and Di Leonardo1991). This contributed to their exclusion from the paid economy and financial services, which in turn resulted in the formation, especially among women living on a low income and in rural areas, of self-help groups and rotating credit and savings associations (ROSCAs), which are still regarded as a major informal financial practice, particularly in the Global South (Ardener and Burman, Reference Ardener and Burman1995; Oduol and Kabira, Reference Oduol, Kabira and Basu1995).
Since Esther Boserup published the UN-commissioned study, Women's Role in Economic Development (1970), showing the exclusionary impact of colonial regulations on women for the first time, international development institutions have promoted projects and measures for the economic inclusion of women. Boserup (Reference Boserup1970) demonstrated how the wage economy that targeted male workers had disturbed earlier complementarity in food production and household management, resulting in the separation of women's unpaid social-reproduction work from waged labour and excluding them from not only economic development, but also education, rights and entitlements. From this perspective, the international development project can be seen as a process of offering women a variety of conditional opportunities for economic inclusion. The idea of conditionality is a very important aspect of this inclusion, as it ties economic opportunities to specific disciplinary conditions such as becoming a micro-entrepreneur or instrumental evaluation of who ‘deserves’ inclusion (Lairap-Fonderson, Reference Lairap-Fonderson, Parpart, Rai and Staudt2002). Access to formal financial services has increasingly become a key instrument of such inclusion. This relationship between financial inclusion, gender equality and development can be explained by three main shifts: from subsidised lending to microcredit; from microcredit to microfinance; and from microfinance to universal financial inclusion.
In the immediate post-colonial period, access to finance seemed a secondary concern to both Western and local governments and international financial institutions such as the IMF and the World Bank, which tended to view the challenge of economic development as a matter of building visible infrastructure such as roads, power plants and canals (Caufield, Reference Caufield1996). However, people living on a low and irregular income, particularly women, were already using forms of informal finance such as self-help groups, ROSCAs and moneylending practices to manage their everyday needs (Geertz, Reference Geertz1962; Bouman and Houtman, Reference Bouman and Houtman1988; Austin and Sugihara, Reference Austin and Sugihara1993; Ardener and Burman, Reference Ardener and Burman1995). Early donor-founded and state-led poverty lending programmes provided small farmers, usually male household heads, with subsidised credit (Rankin, Reference Rankin2013, p. 553); however, the IMF and World Bank considered this inefficient and expensive (Roodman, Reference Roodman2012).
For these reasons, the grassroots microcredit experiment started by Muhammad Yunus in the 1970s in Bangladesh, which held borrowers fully accountable for repaying their loans, was soon acclaimed (Yunus, Reference Yunus1999). Microcredit, modelled around informal savings and credit schemes such as ROSCAs, involves the extension of small collateral-free loans to jointly liable groups of poor women to be used for income-generating activities, mainly in the form of micro-entrepreneurship.Footnote 10 This new development credit system marked a shift in approach from state-subsidised universal access to credit for male-headed households to ‘third-sector microfinance institutions targeting poor, rural women as entrepreneurial agents’ (Rankin, Reference Rankin2002, pp. 11–12). Microcredit became central to the neoliberal development agenda that introduced the Structural Adjustment Programmes (SAPs) of the 1980s and 1990s with the aim of liberalising and globalising former colonies’ economies.Footnote 11 SAPs contributed to the internationalisation of microcredit and various development institutions, from non-governmental organisations (NGOs) to donors and financial institutions, incorporated microcredit into their activities. However, research has shown that SAPs increased economic and social inequality with gender implications. Their focus on marketisation, cuts to public expenditure and privatisation of social services disproportionately affected poor women, increasing their burden of social reproduction and forcing them to take informal and insecure jobs (Elson, Reference Elson and Onimode1989; Reference Elson1991a; Reference Elson, Wallace and March1991b; Beneria, Reference Beneria2003; Bergeron, Reference Bergeron2004; Jaquette and Summerfield, Reference Jaquette and Summerfield2006).
Following criticism of SAPs and adoption of the UN MDGs in 2000 (Rittich, Reference Rittich, Trubek and Santos2006), microcredit has increasingly been promoted as an instrument for achieving social goals such as poverty reduction and gender equality, and 2005 was proclaimed the International Year of Microcredit. The fact that microcredit predominantly targets women and that most borrowers are female was initially considered proof that it was a successful project for women's empowerment. However, feminist and critical-development scholars have long examined and problematised these potential gains, pointing out the patriarchal control over female borrowers both in the household and by the microcredit institutions themselves (Goetz, Reference Goetz1996; Rahman, Reference Rahman1999; Kabeer, Reference Kabeer2001); the gendered notion of shame used as a social control mechanism to ensure repayments (Williams, Reference Williams2001; Rankin, Reference Rankin2002; Roy, Reference Roy2010); the risk of creating ever-expanding cycles of debt (Mayoux, Reference Mayoux2002; Taylor, Reference Taylor2012; Karim, Reference Karim2011); and development organisations and corporations’ appropriation of concepts such as ‘empowerment’ to promote their programmes and products (Lairap-Fonderson, Reference Lairap-Fonderson, Parpart, Rai and Staudt2002; Cornwall and Rivas Reference Cornwall and Rivas2015: 404). These dynamics contributed to what Chant (Reference Chant2008) calls the ‘feminisation of responsibility’: women's disproportionate responsibility for repaying loans through their micro-entrepreneurship activities while also looking after their families and communities.
Interestingly, since the 1990s, the term ‘microcredit’ has been gradually replaced by ‘microfinance’, referring to a broad range of financial products for the poor beyond credit for microenterprises and including savings, insurance and payment services (Armendariz and Morduch, Reference Armendariz and Morduch2010, p. 15). While ‘microcredit’ and ‘microfinance’ are often used interchangeably, ‘microfinance’ denotes a shift in the approach to financial access. The initial focus of microcredit was on poverty reduction and the empowerment of women living in poverty, and the key providers were NGOs. With the change in language came a change in orientation towards more commercially oriented, self-sustaining and regulated microfinance institutions that function according to financial markets, adopting mainstream financial tools such as credit bureaus and credit scoring, and targeting not just poor, but also people on a low income (Robinson, Reference Robinson2001, p. 22; Johnson, Reference Johnson2012). Although microcredit and microfinance schemes have been promoted as more effective ways of achieving poverty reduction, development and gender equality than the previously available subsidised credit, they remain largely dependent on external funding. For this reason, the public sector has increasingly partnered with the private sector to offer microfinance and other profit-based programmes for gender equality. An example of this new focus is the so-called Business Case for Gender Equality framework that developed from the mentioned World Bank's Gender Equality as Smart Economics narrative (World Bank, 2006; 2012), which advocates gender equality as a valuable instrument of economic efficiency and development rather than recognising its intrinsic importance (Chant and Sweetman, Reference Chant and Sweetman2012; Roberts and Soederberg, Reference Roberts and Soederberg2012; Prügl, Reference Prügl2016).
This understanding of gender equality was embraced in the more recent shift towards universal financial inclusion in the years following the 2008 financial crisis. In 2009, the G20 leaders adopted a global agenda promoting universal financial inclusion as a policy instrument for financial stability, economic growth and the realisation of social goals (Soederberg, Reference Soederberg2013; Reference Soederberg2014). The global financial-inclusion agenda has been supported by globally influential institutions such as the G20, the IMF, the World Bank, the World Economic Forum, the UN Capital Development Fund (UNCDF) and the Bill and Melinda Gates Foundation as well as by emerging institutions in the field such as Financial Sector Deepening (FSD) Kenya, the Groupe Speciale Mobile Association (GSMA) representing mobile network operators (MNOs) and the Alliance for Financial Inclusion (AFI) representing regulators in the Global South.Footnote 12 The G20 Principles for Innovative Financial Inclusion were adopted in relation to this agenda in 2010.Footnote 13 It is a non-binding regulatory framework that builds on earlier World Bank documents, in particular the policy research report Finance for All (World Bank 2008).Footnote 14 The agenda and the G20 Principles support the idea of financial innovation through new forms of financial-service delivery that are capable of reaching the financially excluded via routes such as branchless banking and payment services provided by postal and retail outlets in grocery stores, pharmacies, kiosks and petrol stations, among others.Footnote 15
M-Pesa in Kenya, and mobile money more generally, have become examples of financial innovation supporting the objective of extending and facilitating access to finance to those who are excluded or under-served by mainstream financial institutions. Gender equality has become a key mobile-money policy objective, and M-Pesa is often extolled as a successful example in this regard.Footnote 16 As discussed below, this understanding of financial innovation focuses on removing barriers, including regulatory barriers, and increasing the number of people able to access financial services rather than using new financial platforms and the revenue and funding deriving from them to redistribute wealth and support the welfare of financially excluded groups to enable them to take advantage of financial inclusion.
3 The inclusionary regulation of digital financial platforms: the case of M-Pesa in Kenya
The idea of M-Pesa originated from the grassroots practice of transferring prepaid airtime following the rapid spread of mobile phones in Africa, but the development of its platform relied on inclusionary institutional, infrastructural and regulatory arrangements. This section illustrates these arrangements and how they contributed to the rapid expansion of the M-Pesa system, defining its success as a digital financial-inclusion project. The analysis shows that M-Pesa, unlike microcredit programmes, does not specifically target women and its regulation is ostensibly gender-neutral. However, the context, structures and relations within which the M-Pesa platform has been developed and regulated are very much gendered. M-Pesa is the only financial service that many Kenyan women living on a low and irregular income can afford and they integrate it into their informal financial practices, microbusinesses and social networks (Kusimba et al., Reference Kusimba, Krunyu, Gross, Maurer, Musaraj and Small2018).
The institutionalisation of M-Pesa was the result of a public–private partnership between Vodafone and DFID, involving Vodafone's partner in Kenya, Safaricom, and various local and international institutions such as the CBK, financial institutions, tech companies, regulators and development actors. DFID – the UK government sector that manages aid and funds international development research and projects – contributed to M-Pesa via the Financial Deepening Challenge Fund (FDCF).Footnote 17 The fund was designed in the late 1990s to contribute to the realisation of the MDGs via private-sector involvement in the provision of innovative and commercially viable financial services to people living in poverty and on a low income, in particular the ‘economically active poor’. The scheme defined innovation as the creation of a product or service not available to the target market or the application of a technology that reduces the costs of financial services, in this way increasing access to finance (Hughes and Lonie, Reference Hughes and Lonie2007). At about the same time, DFID initiated another project supporting financial inclusion in Africa: the FSD. The first and most relevant FSD was established in Kenya in 2005 and aimed to build retail capacity and competition in the financial sector, develop various support services and address the institutional regulatory and supervisory environment to balance financial inclusion and security issues (Johnson and Williams, Reference Johnson and Williams2013). Besides these projects focusing specifically on financial inclusion, from 2001, DFID funded a series of studies in Africa investigating the relationship between new information technology and poverty reduction, which revealed the potential for using the mobile-phone-network infrastructure to facilitate financial transactions (McKemey et al., Reference McKemey2003; Batchelor, Reference Batchelor2005).
At the 2003 World Summit for Sustainable Development, the UK-based multinational corporation Vodafone, in particular its social-enterprise department, headed by Nick Hughes, was interested in collaborating with the public sector on a long-term development project that could combine profit with social objectives in line with the idea of social entrepreneurship (Nicholls, Reference Nicholls2006). According to Hughes, many technology-based companies such as Vodafone were focusing on developing the technology rather than expanding the market, and public–private partnerships could circumvent this (Hughes and Lonie, Reference Hughes and Lonie2007). Vodafone was awarded a DFID FDCF of £1 million, which it matched with a combination of cash and staff time, to develop a project using the mobile-phone infrastructure to facilitate and expand the reach of financial services. The project aimed to fill a niche in the market by serving those with no access to formal financial services and, in this way, contributing to the MDGs (Hughes and Lonie, Reference Hughes and Lonie2007). The area of interest for the implementation of the project was East Africa, a FDCF target zone, and Kenya seemed a likely option, as both DFID and Vodafone already had a relevant presence in the country. Safaricom, which is 40 per cent owned by Vodafone, had a 75 per cent share of the mobile-phone market in Kenya at the time and a strong brand presence (Owino and Tanui, Reference Owino and Tanui2011). Local institutions, in particular the CBK, expressed their willingness to collaborate on the project to develop a mobile-money service, which was named M-Pesa (M for mobile, pesa is Swahili for money).
The development of the M-Pesa platform relied on institutional arrangements between local, UK and international institutions. Vodafone commissioned Scientific Generics (now Sagentia), a UK consultancy firm based in Cambridge, to develop the software. Many of the available financial-service platforms had been designed for integration with Western banking infrastructures and could only provide an additive banking approach, for example by adding new channels via which customers could access their bank accounts. However, M-Pesa was intended not as a banking service, but as an MNO-based service outside the banking infrastructure, so its functionality needed to be integrated with MNO products and services (Wooder and Baker, Reference Wooder and Baker2012). The software was developed around the well-known and widely available SMS technology so that the system could be used on basic, black-and-white mobile phones. M-Pesa was situated on the SIM card and linked to the mobile number, and the system was designed in both English and Swahili to facilitate the inclusion of people living in the rural areas and speaking mainly Swahili.
The M-Pesa service facilitated payments by allowing the conversion of cash into electronic money (e-money); the transfer of e-money to other users, whether people or institutions, for which the payer would pay a fee proportionate to the amount transferred; and the conversion of e-money back into cash, for which the payee would pay a fee. To do this, DFID and Vodafone used Safaricom's well-established network of airtime dealer outlets as mobile-money agents where consumers could go to open an M-Pesa account and convert cash into e-money and vice versa. M-Pesa agents were provided with a mobile phone and an agent's M-Pesa menu that enabled them to register customers and manage their own M-Pesa agent account. They acted as cash merchants, managing their own liquidity as agents and meeting customers’ requests. DFID, Vodafone and Safaricom decided to hold M-Pesa's money in a trust account at the Commercial Bank of Africa, managed by the M-Pesa Holding Company.Footnote 18
While Vodafone and DFID initially saw M-Pesa as a system to facilitate microfinance transactions, following a pilot to test its functionality they decided to promote it as a low-cost payment platform on which they would create a range of different services and products for all Kenyans, with particular potential for those with no access to other formal financial services. At the time of the pilot, mobile money was unregulated, so the CBK opted for a ‘test and learn’ approach.Footnote 19 This meant that, while various audits were conducted to make sure that M-Pesa complied with international anti-money laundering and counter-terrorist financing laws, the CBK supervised the service in partnership with the MNO, maintaining an openness to new financial services and providers.Footnote 20 The CBK allowed Safaricom to operate under a special licence from the Communications Commission of Kenya, dispensing with the need for a banking licence, and the Communications Act 1998 was amended in 2009 to recognise electronic transactions.Footnote 21 This demonstrates how M-Pesa was created at the intersection between telecommunications and finance, with the CBK and the Communications Commission of Kenya collaborating over its regulation.Footnote 22
After conducting various legal and risk assessments and authorising two external audits, the CBK issued Safaricom with a Letter of No Objection (Muthiora, Reference Muthiora2015, p. 11). The letter represented M-Pesa's regulatory framework from 2007 to 2014, when the National Payment System (NPS) Regulations were adopted by the National Treasury.Footnote 23 This regulatory framework aimed to ensure the system's integrity and security, and to validate the ‘social’ mobile-money business model and favoured its expansion (Muthiora, Reference Muthiora2015, p. 20). The NPS Regulations, which codify the regulatory practices adopted by the CBK, have also contributed to expanding the mobile-money system by allowing both banks and non-banks to provide mobile-money services, and mobile-money providers to offer a variety of e-money products and services.
All of these institutional arrangements facilitated access to the service and the expansion of the mobile-money market. According to a survey by FSD Kenya in 2006, just before the launch of M-Pesa, repeated in following years, the number of people with access to formal finance increased from 20 per cent in 2006 to 80 per cent in 2019 (FSD, 2007; 2009; 2013; 2016; 2019) and the number of people using only informal financial methods decreased from 32 per cent in 2006 to 6 per cent in 2019 (FSD, 2007; 2019). The number of women and men using formal financial services increased from 20.5 per cent and 33.2 per cent in 2006 to 70.7 per cent and 79.7 per cent in 2016, respectively. The lenient regulation of mobile money has allowed people to integrate the M-Pesa platform with their informal practices easily, contributing to the expansion of the mobile-money market. Women in particular have started using M-Pesa as part of informal financial groups such as ROSCAs, using the service to store money and make payments to group members.Footnote 24
While the increase in the number of female customers has been used to frame M-Pesa and its regulatory approach as successful in terms of gender equality (see Suri and Jack, Reference Suri and Jack2016, whose study has been embraced by the Gates Foundation, GSMA, AFI and other organisations supporting the digital financial-inclusion agenda), no attention has been paid to the gendered causes of financial exclusion and their implications. These causes, also mentioned in the 2006 survey (FSD, 2007), include lack of income (58.9 per cent) and lack of regular income (31.6 per cent). The 2016 survey shows that the main reason for stopping using a bank account was loss of income source (39.4 per cent) and the World Bank's 2017 Global Findex data (World Bank, 2018) shows a clear link between access to finance and regular income. None of these surveys provides data on the gender-related reasons behind financial exclusion.
This section has shown how the regulation of M-Pesa has been instrumental in eliminating barriers to accessing and using the service, and how it has focused on expansion rather than the causes of exclusion. As discussed in the first part of this paper, these causes and their gendered implications have been shaped by colonial regulation and development policies. Without clearly recognising this legacy, current global financial-inclusion policies call for the removal of legal barriers to accessing digital financial services as the key to gender equality (World Bank, 2015). Interestingly, the World Bank's 2017 Global Findex (2018, p. 25) states that men are more likely to own a bank account and women to have a mobile-money account, presenting mobile-money services as opportunity for women without questioning the gendered structural inequalities that limit their access to mainstream banking. This approach has framed digital financial-inclusion policies as aiming to create an enabling environment for the expansion of financial platforms and the market opportunities deriving from them (Gabor and Brooks, Reference Gabor and Brooks2017, p. 11), without considering the adoption of measures to address the gendered socio-economic disadvantages that cause financial exclusion. The next section analyses some of the problematic aspects of promoting mobile-money services as opportunities for gender equality.
4 The exclusionary implications of inclusionary regulations: logic of opportunity vs. politics of redistribution
The increase in the number of women with access to digital financial services has been promoted as a positive outcome in terms of gender equality. The ‘test and learn’ approach to the regulation of mobile-money services is seen as instrumental in facilitating this aim, with international institutions such as the UN, the IMF and the World Bank, as well as emerging regulatory and policy actors in the area of digital financial inclusion such as GSMA and AFI, considering M-Pesa an example of good regulatory practice. This section looks at the gender implications of the inclusionary regulation of M-Pesa, more specifically examining whether this regulatory approach can contribute to creating an environment that not only enables access to financial services, but also challenges unequal gender relations. As Elson argues, a gender-equitable system would require the sphere of finance to serve the needs of social provisioning and support social-reproduction work, which is disproportionately women's responsibility (Elson, Reference Elson2010; Reference Elson, Rai and Waylen2014). It is important to mention in this regard that, while social-reproduction work is recognised in the SDGs in relation to gender equality, there is no discussion in international development policies of possible measures to address women's unsustainable burden of unpaid work or to favour its fairer distribution in society.Footnote 25
Two main and related aspects of the regulation of M-Pesa are relevant to this analysis: the first is that M-Pesa is regulated as a payment system and not as a banking service; the second is how the ‘test and learn’ approach to regulation allowed Safaricom to create partnerships with public- and private-sector institutions to develop a variety of socially relevant products and services on the M-Pesa platform. Maurer (Reference Maurer2012, p. 303) considers regulation in the field of mobile money ‘retrospective ethnography of potential’ rather than ‘proscriptive or restrictive of human action’. This means that mobile-money regulation offers an account of the past by considering the obstacles to accessing financial services; it is responsive to the present by adopting a ‘test and learn’ approach; and it keeps an eye to the future with a view to a particular aim, which, in the case of M-Pesa, is both financial inclusion and the expansion of the mobile-money market.
The CBK decided that the Kenya Banking Act did not provide a legal basis for either M-Pesa or the regulation of the mobile-money products offered by MNOs. Mobile-money providers are not classed as financial intermediaries, and mobile-money services are not banking businesses as specified in the Kenyan Banking Act. A banking business involves not only accepting money from the public, but also ‘the employing of money held on deposit on current accounts, or any part of the money, by lending, investment or in any manner for the account and at the risk of the person so employing the money’.Footnote 26 The M-Pesa system is rather designed to provide a money-transfer service converting cash into e-money and e-money into cash through mobile-money agents acting as cash merchants. These transactions are managed via the mobile phone and are reflected in the customer's mobile-money wallet. Customers depositing money in their M-Pesa account purchase electronic units for cash, which can be transferred or withdrawn for a fee.
M-Pesa customers remain in control of their electronic money at all times. There is no financial intermediation in banking terms between M-Pesa customers and the mobile-money agents. The agents do not perform bank credit assessments or risk management as deposit-taking banking institutions do: they simply exchange cash for electronic money and vice versa. The money is physically kept in pooled trust accounts at the Commercial Bank of Kenya and other banks in the custody of a trustee, the nonprofit M-Pesa Holding Company.Footnote 27 The use of trust accounts also means that M-Pesa customers are not paid interest on money kept in their M-Pesa account. Even if customers see keeping money in the M-Pesa account as saving, this is not the case from a regulatory perspective, as the CBK has been very careful to make clear from the outset. While mainstream banking terms such as ‘withdrawals’ and ‘deposits’ are used in M-Pesa transactions, in practice, customers are just exchanging cash for e-money and transferring e-money on payment of a fee.
The fee itself has an important regulatory role in defining access and facilitating the expansion of the service. The fees for each transaction are taken directly from the customer's account, making each transaction profitable for the MNO on a stand-alone basis. There is no charge for signing up to M-Pesa or for converting cash into e-money (i.e. depositing money) and the charge for transferring e-money and converting it back into cash (i.e. withdrawing money) depends on the amount and whether the recipient is registered with M-Pesa.Footnote 28 The different fees for registered and unregistered customers were initially adopted to facilitate the expansion of the service: M-Pesa customers could send money to anybody in Kenya who had a mobile phone, whether or not they subscribed to M-Pesa, but the fee for transferring money to unregistered customers was much higher than that for registered users.Footnote 29 Research shows that M-Pesa users persuaded their relatives and friends to sign up to M-Pesa to avoid the higher transfer fee (Mas and Radcliff, Reference Mas and Radcliffe2010, p. 15). This difference has been reduced with various progressive changes to the fee structure that reflect the expansion of the M-Pesa system and the mobile-money market more generally.
The regulation of M-Pesa as a payment system also means that, while the MNO, Safaricom, receives a secure source of profit via the fees, customers cannot make decisions about interest earned by their M-Pesa funds kept in the trust accounts. According to the NPS Regulations, ‘any income generated from placement of these trust funds shall be used in accordance with trust legislation and in consultation with the Bank [or] donated to public charitable organisations for use for public charitable purposes’.Footnote 30 Interest on customers’ deposits is managed by the M-Pesa Holding Company, which claims that the M-Pesa Foundation, an independent charitable trust created in 2010 for this purpose, administer it in the interests of all Kenyans.Footnote 31 Projects funded by the M-Pesa Foundation rely on partnerships between Safaricom, donors, local and international institutions and the private sector to combine mobile technology and social objectives such as education, health care, gender equality and environmental protection according to the logic of social entrepreneurship, namely making a profit while promoting social good.
A number of projects supported by the Foundation use mobile-money services to achieve social objectives such as maternal health. Uzazi Salama (safe motherhood), for example, is a programme realised through a partnership between the M-Pesa Foundation, Amref Health Africa, the PharmAccess Foundation and the Samburu County government to create a more efficient transport and referral system for maternal health care. A similar scheme, the Health Enablement and Learning Platform (HELP), is a mobile-phone-enabled learning programme realised via a partnership between the M-Pesa Foundation, Amref, Kenya's Ministry of Health and Accenture Development Partnerships in three locations in Kenya: Nairobi's Kibera slum, the rural district of Mwingi and the Samburu pastoralist region. It provides volunteers with mobile-phone-based training, after which they are then responsible for passing on health-related information to community members and providing support in emergencies.Footnote 32
The ‘test and learn’ approach to the regulation of mobile money has allowed Safaricom to collaborate with financial institutions, corporations and donors, and to rely on mobile data to develop a variety of mobile-money-enabled products and services targeting the ‘unbanked’ and poor and low-income consumers in particular (Maurer, Reference Maurer, Roy and Crane E2015; Gabor and Brooks, Reference Gabor and Brooks2017). Michael Joseph, former Safaricom CEO, refers to this practice as the ‘McDonald's strategy’ or the ‘Coca-Cola strategy’, emphasising the potential for M-Pesa's mass penetration through partnerships and the proliferation of mobile-money products and services (Omwansa and Sullivan, Reference Omwansa and Sullivan2012, p. 24). This approach seems to have guided the development of M-Pesa as a digital financial-inclusion platform.
Safaricom has concluded agreements with microfinance institutions and banks to integrate their credit, savings and insurance products with the M-Pesa platform. Among other attempts to facilitate access to formal financial services such as credit and savings, in 2012, Safaricom and the Commercial Bank of Africa (CBA) launched M-Shwari (shwari is the Swahili word for calm) – a banking service that has developed savings and credit products by emulating the ways in which people use M-Pesa. It allows M-Pesa users to open a free savings account directly from their mobile phone without requirements such as a minimum deposit or credit history, and offers low-value (100–50,000 KES), fee-based (7.5 per cent facilitation fee), short-term loans (thirty days) (Cook and McKay, Reference Cook and McKay2015). Approval of a loan is an automated procedure based on credit-scoring rules that use the applicant's airtime and M-Pesa transaction record and risks reproducing negative patterns of microcredit such as over-indebtedness (Bateman et al., Reference Bateman, Duvendack and Loubere2019).
Besides financial services, Safaricom has concluded multi-institutional agreements to create fee-based products and services providing access to needed services such as health care and electricity. Some of these projects are provided in collaboration with philanthropic foundations, similar to those funded by the M-Pesa Foundation, while others allow users to buy products and services on credit, repaying the debt in small and flexible instalments via the M-Pesa platform. There are numerous mobile-money services and numerous possibilities for the development of new ones.
Some schemes specifically target women in their biological reproductive role, including FistulaCare, which facilitates the treatment of women with fistula. FistulaCare is provided by the Freedom from Fistula Foundation (FFF), founded by the millionaire businesswoman and philanthropist Ann Gloag in 2008. Women can call the FFF hotline and can receive treatment at the Jamaa Mission Hospital in Nairobi. If a woman cannot afford transport to the hospital, FFF can send them the fare via M-Pesa, with an additional 25 KSH (about 0.30 USD) to cover the transaction fee.Footnote 33 However, the foundation advertises only the free fistula treatment and the fare to the hospital in order to avoid ‘women who have the ability to pay using project funds’, which prevents some women who could benefit from it from contacting the FFF.Footnote 34 A similar project in Tanzania via a collaboration between the Comprehensive Community-Based Rehabilitation Hospital and the UN Populations Fund (UNFPA) works through intermediaries called community ambassadors, who receive a small payment for identifying women with fistula and liaising with the hospital. The hospital determines which women are suitable for the programme and can send them the fare to the hospital via M-Pesa.
An example of a credit-based product that is repaid via M-Pesa is M-Kopa (kopa, ‘to borrow’ in Swahili), founded in 2011 by Nick Hugh, the former head of social enterprise at Vodafone, who started M-Pesa. M-Kopa is a micro-solar system consisting of a base station with a solar panel, three lamps and a charging kit for mobile phones. It was developed via a partnership between Safaricom, entrepreneurs, developers and donors, initially the Bill and Melinda Gates Foundation, DFID and the Shell Foundation, which were later joined by other multinational corporations including Mitsui. The donors and companies provide initial funding producing the system, which is offered to customers on a credit basis. Customers pay about 18,999 KES (about 186 USD) for the system, which includes a deposit of 2,999 KES (about 30 USD) and daily payments of 50 KES (about 0.50 USD) for a year via M-Pesa or, more recently, other mobile-money systems.Footnote 35 Customers can use the solar system for as long as they keep up their payments and, when the repayment is complete after a year, they own it.
These examples show the numerous products and services that can be built on the M-Pesa platform. As M-Pesa started as a project for financial inclusion, all of these projects and services have been tied to this main objective. Mobile money has made products and services that are tied to this main objective, underlining access to finance as instrumental to the achievement of social objectives such as poverty reduction and gender equality. Mobile money has made access to basic resources and services conditional on access to finance via small credit systems such as M-Shwari and mobile-money-enabled projects.Footnote 36 As many mobile-money projects and products target women directly in their biological reproductive role or indirectly in their social-reproductive role, this has automatically contributed to increasing the number of women ‘included’ in the financial system by offering them products and services that they and their household desperately need and that are not publicly available. While these projects are appealing and can be considered useful in the absence of other forms of access, not everyone at the lower end of the income distribution can access or successfully use mobile-money-enabled programmes, not only because they need a mobile phone and an M-Pesa account, but also due to other limitations. There is often a lack of information about eligibility for the M-Pesa Foundation and other donors’ maternal health programmes, for instance, and they are often limited to particular areas, depending on the individual partnership and the partners’ interests.Footnote 37 In the case of fee-based products and services, which could be used to support social-reproduction work, the main obstacle is the initial deposit and the commitment to pay daily or weekly.Footnote 38 These services are meant to give people both an opportunity and the responsibility for taking advantage of products and services that could help them to improve their lives; for instance, the M-Kopa solar-power kit is promoted as an opportunity for the poor to study and work, holding the users themselves responsible for translating this into ‘success’.
While the products and services arranged through the M-Pesa infrastructure aim to facilitate the achievement of social goals, they usually reconceptualise public goods and necessary resources as for-profit enterprises, transforming basic needs into market opportunities purchasable through mobile financial services facilitated by Safaricom. As basic resources and services are sold through the M-Pesa infrastructure, they become marketised and financialised, and users’ livelihoods become dependent on the market and integration into financial circuits. Resources are often bought on credit or through savings schemes and repaid in small and/or flexible instalments that, depending on the amount, include a fee to the MNO for each transaction. As Ribot and Peluso argue in ‘A Theory of Access’ (Reference Ribot and Peluso2003), fees regulate forms of decentralised and marketised access and limit the achievement of the socio-economic rights of poorer people.Footnote 39 In the mobile-money system, basic needs such as access to water and health care are promoted as social objectives enabled by what Gabor and Brooks (Reference Gabor and Brooks2017, p. 2) call the fintech–philanthropy–development complex, rather than as socio-economic rights provided by the state. This form of blended financing for development (Tan, Reference Tan2018) results in a lack of accountability for delivering social objectives in ways that do not challenge or even exacerbate the inequalities they are supposed to address, and fail to realise decent standards of living for all people (Kabeer, Reference Kabeer2015).
Mobile-money products and services can appear to generate emancipatory effects by creating opportunities for greater financial inclusion, helping poor households access resources that provide material input for social provisioning and access to social services. These individualised and marketised forms of access, however, reproduce divisions and inequalities among the population and impose new burdens on poorer women, who are disproportionately responsible for social-reproduction work (Molyneux, Reference Molyneux2006; Roberts, Reference Roberts2015). The increased responsibility is presented not as such, but as an opportunity that comes with access to finance through M-Pesa. The opportunity to gain autonomy, independence and equality via mobile-money platforms is limited by gendered structural inequalities shaped by colonial history and post-colonial development policies. This exposes a general problem of financial inclusion as a development strategy for gender equality: the potential benefits can very easily become burdens when strategies to enhance women's access to resources simply increase the load they bear and the number of demands upon them. This depends on the fact that such initiatives create opportunities for women living in poverty or on a low income without providing them with the resources and social infrastructure necessary to take advantage of such opportunities (Kabeer, Reference Kabeer2015).
While M-Pesa and all the projects and services provided via the mobile-money platform represent a secure source of income for the MNO, the profits and funding deriving from M-Pesa are not redistributed to benefit the financially excluded. As Bateman et al. (Reference Bateman, Duvendack and Loubere2019) observe, considering that Safaricom is owned 40 per cent by Vodafone and 25 per cent by investors, leaving only 35 per cent owned by the Kenyan government,Footnote 40 this means that a relevant proportion of the revenue M-Pesa produces is not locally redistributed, but rather repatriated back to shareholders in the UK and other countries in a form of neocolonial digital extraction (Bateman et al., Reference Bateman, Duvendack and Loubere2019, pp. 7–8).
This paper argues that M-Pesa is regulated according to a logic of opportunity rather than a politics of redistribution. The idea of opportunity tends not only to ignore past and present political, economic and legal dynamics that have shaped gendered forms of inequality and exclusion, but also risk furthering unequal gender relations. According to Ferguson (Reference Ferguson2015), major social problems such as poverty and inequality can be considered fundamentally distributive issues and, for this reason, distribution should be central to political decisions and regulatory measures. Ferguson (Reference Ferguson2015, p. 36) argues that, to reduce inequality, the world must redistribute the existing wealth based not on market logics or charitable giving, which would reproduce asymmetric power relations, but on the idea that people are entitled to a rightful share of the global wealth.
A politics of redistribution, differently from a logic of opportunity, takes the view that people are entitled to a fairer distribution of resources such as food, water, land, money, information and technology; of responsibilities; and of the power that influences discourses, agendas and decisions. This is different from the decontextualised and depoliticised neoliberal idea of accepting the inequality deriving from economic growth with the promise that it will be redistributed through market opportunities or aid programmes (Ferguson, Reference Ferguson2006; Reference Ferguson2015). In the case of digital financial platforms, redistributive measures would allow the financially excluded living on a low and irregular income to take full and fair advantage of financial services. Redistribution also has important implications for gender relations in terms of alleviating women's burden of social-reproduction work. Possible redistributive measures could include the use of M-Pesa's profits, the interest generated by the M-Pesa trust accounts or philanthropic foundations’ grants to directly fund collective necessities such as water, health care and education via publicly accessible services and social assistance. Such measures would contribute to addressing women's disproportionate responsibility for social reproduction and would have a greater impact on unequal gender relations, particularly at the lower end of the income distribution.
5 Conclusion
Kenya's M-Pesa has been acclaimed by international organisations, governments, financial institutions, private-sector actors, philanthropic foundations and regulators as a successful digital platform for financial inclusion that is contributing to the achievement of development goals such as gender equality. A key aspect of its success has been attributed to its inclusionary regulation, which has facilitated access to financial services for those excluded from mainstream banking, complying with international security requirements while maintaining an openness to new mobile-money products and providers. Bridging feminist political economy analysis and socio-legal enquiry and borrowing insights from law and development and post-colonial literature, this paper has called into question the success of M-Pesa from a gender perspective. After illustrating how the nexus between gender and financial inclusion has been shaped by colonial rules and development interventions, it has examined M-Pesa's regulatory arrangements and the gender implications of the projects, products and services these facilitate.
This paper concludes that, while M-Pesa has increased the number of women able to access formal financial services, it has failed to contribute to challenging the unequal gender relations at the lower end of the income distribution, mainly due to a lack of corresponding redistributive measures addressing the gendered socio-economic inequalities that have caused, and reproduced, financial exclusion. The increasing revenue deriving from M-Pesa, to which women living in poverty and on a low income contribute greatly, is not distributed to them; however, possible rewards are offered in the form of opportunities, leaving them with the responsibility for and risks inherent in taking advantage of these opportunities. As mentioned above, possible redistributive measures could include unconditional public access to health care, electricity and other necessary services rather than fee- and debt-based services.
A main problem with seeing digital financial platforms such as M-Pesa as a successful development strategy for gender equality resides in the same idea of inclusion. Inclusive initiatives are built on existing inequalities: the structures of exclusion that have shaped socio-economic relations since the colonial era are reshaped by a logic of inclusion that risks reproducing them. As Spivak (Reference Spivak1993, p. 46) says, strategies that secure greater inclusion for women and disadvantaged groups are things that ‘one cannot not want’. What is ambivalent, however, is their inclusion in a social, political and economic order originally founded on their exclusion. The rhetoric of inclusion has often been used to reframe rather than challenge problematic development discourses and measures such as those concerned with gender equality (Cornwall and Rivas, Reference Cornwall and Rivas2015).
The progressive expansion of the development framework to include social goals has resulted in the promotion of financial services as useful or even necessary for the achievement of goals such as poverty reduction and gender equality. The same idea of the ‘unbanked poor’ coined by international financial institutions suggests a nexus between financial exclusion and the perpetuation of poverty. This has also resulted in the legitimisation of a variety of development agents’ provision of socially relevant financial products and services, without holding them accountable for delivering social objectives in ways that reproduce instead of challenging inequalities (Adams and Pingeot, Reference Adams and Pingeot2013; Blowfield and Doloman, Reference Blowfield and Dolan2014; Kabeer, Reference Kabeer2015). The responsibility for creating ‘development’ has been increasingly shifted to individuals, increasing women's social-reproduction burden (Roberts and Soederberg, Reference Roberts and Soederberg2012).
Development measures and projects tackling exclusion tend to focus on products and services that can include poorer consumers rather than on the ‘inequalities in power and voice that keep poor populations systematically, socially and politically excluded’ (Banks and Hulme, Reference Banks and Hulme2014, p. 192). This understanding of exclusion simplifies regulation, policy and the calculation of development outcomes without engaging with more complex matters such as the global maldistribution of wealth and its gender implications, the entitlement of all people to a decent livelihood, and the global and local public obligation to ensure this. Digital financial inclusion has become a quick fix for all issues relating to gender inequality, with gender equality often reduced to a simple, measurable and even profitable goal that can be achieved without challenging unequal power structures and relations. While the regulation of mobile money has favoured the expansion of the M-Pesa platform to include more women in the financial system, it has not contributed to the redistribution of the power, resources and gendered responsibilities necessary to challenge unequal gender relations.
Acknowledgements
Earlier versions of this paper were presented at the Law in Context Early Career Workshop at the Centre for Socio-Legal Studies, University of Oxford in June 2017 and the GEM STONES-funded workshop Economic Regulations in a Digital World in Toronto in March 2019, and I benefited greatly from organisers’ and participants’ valuable feedback at both events. I am very grateful to David Nelken, Josh Bowsher and two anonymous reviewers for their insightful and helpful comments.
