Kenya, already a hotbed of mobile money transfers, is about to become a world leader in mobile microfinance. Musoni, the first all-mobile microfinance institution, is poised for rapid growth in Kenya with investments from the Grameen Foundation and others who see the potential of mobile microfinance to improve economic prospects for the rural poor.
“Musoni can go places where others cannot,” explains Bart van Eyk, CEO and co-founder of the parent Musoni BV, based in Amsterdam. Musoni’s “nextgeneration microfinance” model means customers don’t have to travel to distant bank branches to withdraw funds against approved loans. Instead, they can make cash withdrawals almost anywhere in the country using M-PESA, the same mobile money platform already used by 68 percent of adults in Kenya. MPESA has a network of 40,000 agents who cover even the most remote reaches of the country. “This saves our clients hours of travel to a town where there’s a bank branch, where they typically would have to stand in line for hours,” says van Eyk.
The mobile model also saves Musoni the expense of building its own traditional branches with secure strongrooms and safes, which can cost several hundred thousand dollars apiece. “The real benefit is cashless banking,” says David James, CEO of Musoni Kenya. Greater efficiency translates to faster service, with loans often approved within a day. A technology team in the Netherlands works on the back end to make the model as efficient and paperless as possible.
From a development standpoint, Musoni Kenya offers a potential path to financial inclusion for millions of unbanked citizens. Two-thirds of the world’s poor lack bank accounts, according to the World Bank Global Findex. Although Kenyans have been quick to warm up to mobile money transfers, especially for sending money home from city to village, many still have no access to the broader savings and loan products.
“Mobile transfers serve a real need, but it’s just scratching the surface of financial services,” says Steve Wardle, Grameen Foundation’s regional director for Africa. Products like mobile savings accounts and longerterm microloans for agriculture “are more complex and harder to structure,” he says. “That’s what Musoni is all about: taking this mobile platform that has so much potential and bringing it to the next level.”
Wardle says Musoni offers “a huge opportunity to address market failures in sub-Saharan Africa with innovation that can be game changing.” That’s why Grameen Foundation, through its Pioneer Fund, purchased a 25 percent stake in Musoni Kenya in May. Grameen’s investment was matched by CARE’s Access Africa Fund and KfW Bankengruppe, with all three organizations taking a seat on the board of Musoni Kenya.
Once the model is fine-tuned in Kenya, Musoni plans to expand across Africa. Uganda, Tanzania, and Rwanda are likely markets within the next five years. “We want to develop a whole system in Africa,” says van Eyk, “and think we can make the biggest impact by focusing on rural areas.”
Grameen brings decades of expertise in rural microfinance that will help shape the development of mobile microfinance. “One of the misunderstandings of microfinance is that it’s microloans,” James says. “We want our clients to have access not just to loans, but also to savings, insurance, and the whole gamut of services that improve financial literacy.” He also expects strong relationships with customers to be part of the model, with Musoni field staff making client visits and getting to understand customer needs firsthand.
If progress occurs as expected, Musoni will live up to its name. The “m” stands for mobile. “Usoni” is Swahili for future.