MICROCAPITAL BRIEF: In Kenya, Fraud Cases Embarrass Mobile Money Industry

Recent cases of fraud threaten to undermine trust in money transfers by mobile phone, a service which has increased financial inclusion in many countries. In one case, an agent of the Kenyan service M-Pesa reportedly was tricked into sending KES 50,000 (USD 600) to a fraudulent account. Other cases include theft by persons posing as staff of Safaricom, the Kenyan firm that launched M-Pesa in 2007 in partnership with Britain’s Vodafone. Since many accounts are unregistered, it is often impossible to get money back. Another criticism of mobile money services is that they function like bank savings accounts, but are not regulated and safeguarded to the same extent as banks. Between July and September 2011, USD 683 million was transferred over mobile phones in Kenya [1].

By Natalie Baer, Research Associate

ABOUT M-PESA: M-Pesa is a Kenyan mobile money service. The “M” stands for “mobile,” and “pesa” means “cash” in Swahili. Launched in 2007 by Safaricom Limited, a Kenya-based cellphone service provider, M-Pesa was developed by Vodafone Group Private Limited Corporation, a British multinational mobile network operator. As of March 2011, M-Pesa reports having 13.8 million registered customers, roughly one third of Kenya’s population.

Sources and Additional Resources:

Mobile Money Security: What is the Answer – Regulation or Technology?
http://gbiportal.net/2012/02/27/mobile-money-security-what-is-the-answer-regulation-or-technology/

MicroCapital story, “MICROCAPITAL BRIEF: 84% of New Cellphone Users in Kenya Signing Up for Mobile Money Transfer” https://www.microcapital.org/microcapital-brief-84-of-new-cellphone-users-in-kenya-signing-up-for-mobile-money-transfer/

MicroCapital story, “MICROFINANCE PAPER WRAP-UP: Saving Through the Mobile Phone – The Case of M-PESA, by Olga Morawczynski, Published by Microfinance Information Exchange (MIX)” https://www.microcapital.org/microfinance-paper-wrap-up-saving-through-the-mobile-phone-the-case-of-m-pesa-by-olga-morawczynski-published-by-microfinance-information-exchange-mix/

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