In early 2004, Nick Hughes, the then Head of international payments at Vodafone group landed a ground funding deal with the UK’s Department for International Development (DFID) to finance a micro-finance concept idea he had.

The purpose of this funding was to assist private-sector companies like his, to take risks on certain special projects. At the time, Micro-finance and Micro-Credits dominated the conversations of every economist; as they were seen as a recipe for an economically thriving nation, especially for the developing world.

Mr. Nick Hughes then put together a proposal that showcased how Mobile Phones could be used to make financial transactions. And it is with this proposal that he approached DFID where they found it sound; and agreed to fund it.

With the money, Mr. Nick and his team designed a pilot system that involved working with a microfinance institution and a commercial bank to disburse loans through mobile wallets and then allowing customers to repay over time.

But the system needed the special backing of a mobile operator and when he came to Kenya that same year, only one man could organize such an affair, Michael Joseph, the Safaricom CEO.

Now the real work would soon begin.

They named this system M-Pesa, and they could take advantage of Safaricom’s Huge customer base which was somewhere between 2 – 3 Million customers at the time. And so, M-Pesa was first put to test in the industrial town of Thika.

Within a few months, Nick Hughes noticed an interesting trend among its pilot users. Hughes noticed that one particular feature within M-Pesa was gaining traction.

Apparently some customers groups were putting more than enough money into their M-Pesa wallets than needed to repay the loans they had taken. These customers would then send each other the balance.

Hughes shared this insight with Joseph. It is at this point that the pair decided that they had just discovered a new use for the system; more than just repaying small loans. They decided that they would make this thing simpler by turning off some complex micro finance features and just dedicate M-Pesa to cover person to person transactions.

Joseph gave the green light for the software to be re-written in order to accommodate this new development, and 3 years later in March of 2007, M-Pesa was officially launched.

A clear and effective marketing campaign dubbed ‘send money home’ quickly gave it popularity among Safaricom’s customer base. But it was a $ 10 Million strategic investment in a large distribution network of M-Pesa agents that saw its use skyrocket, later to become a necessity for any handset owner regardless of their type of device.

Customers could send and receive money to one another and could easily cash out within 200 meters. This type of transaction was very secure and could take place in seconds at a cost of just one percent of the transaction value.

An initial business plan that Michael considered laughable indicated that M-Pesa had the potential of signing up to 350,000 customers within the first year. However, an ambitious Michael wanted more. He wanted one million customers and this ambition was met with voices of doubt by his team.

Being a man of extraordinary force – a necessary trait for any leader of men, and being a man who had an instinctive empathy and understanding of how his customers operate, Michael decided that a million customers meant a million customers and that it was an achievable goal. So he sat his team down to reason together and was even kind enough to make them an offer they couldn’t refuse.

Michael assured them that it was either they bring in a million customers or he would have no option but to fire all of them. Of course, his team understood that this little threat was not a personal thing but a matter of business. Within that first year, M-Pesa had registered 1.2 million customers.

While this was a huge milestone, it is nothing compared to what M-Pesa would become. Today, 12 years later – M-Pesa has 24 million active users in Kenya alone – moving over Ksh 10 billion per day through their mobile phones. The M-Pesa mobile money platform has evolved to become a model for anyone in the world wishing to learn about mobile money.

After Michael Joseph stepped down in 2010, Bob Collymore – the late Safaricom CEO who took M-Pesa to legendary millstones through a set of customer-centric strategies that were well intertwined with customer’s daily lives.    

The now GSMA accredited international mobile money transfer system has grown to be so robust with ubiquitous use cases that range from disbursing salaries, paying bills and school fees among others.

You can literally pay for anything with M-Pesa, which saves users’ further time and money - because they do not need to waste hours queuing up at the bank.

It has also become a widely accepted mode of payment by almost every merchant in the country through the Lipa Na M-Pesa feature that has revolutionized Kenyan commerce. Some merchants have even gone completely cashless and insist on M-Pesa as the preferred mode of payment of any size.  

A partnership with international fin-tech players like China’s Ant Finance, PayPal, Western Union & Ria for international remittances has enabled online shoppers to perform seamless check-out payments, effectively placing M-Pesa light-years ahead of any other mobile money platform regionally and abroad.

Safaricom itself relies on M-Pesa as a channel of paying dividends to shareholders. Investors are also using it to buy Kenyan government bonds, in fact, 70% of Kenyan government bonds are M-Pesa trust accounts.

M-Pesa’s contribution to financial inclusion in the country cannot be understated. Today, 8 out of 10 Kenyans have a mobile banking account thanks to M-Pesa. This is the factor that gave birth to mobile loan services which have built their applications on top M-Pesa open-source platform.

The introduction of the world’s first mobile overdraft facility ‘Fuliza’ built on top of M-Pesa is seen as an ideal and convenient solution for a population regularly haunted by a credit drought. Fuliza allows customers and merchants to make seamless purchases even when they have insufficient balances.

M-Pesa is so successful that it now greases half (50%) of the wheels of the country’s GDP vehicle. All these factors combined have effectively placed Kenya on the global map as a pioneer in mobile money and an innovative nation. M-Pesa has essentially given Kenya a certain reputation as a country not to be taken lightly.