If I spoke to you of an African country where the citizens no longer have cash, where money is seen with mistrust, or where money is practically gone from the streets, what image would you have in mind? A terrible economic crisis? A bloody coup d’état? A civil war which plunged the country into chaos? In the collective Western imagination, when we think of Africa, the word “revolution” is often confused with the words “instability” and “disaster”. But in Kenya, it is a positive and unusual revolution that has been going on over the last decade: a small technological miracle.

In Nairobi just like in Mambosa, and even in the country’s smaller cities, nobody is walking around with shillings in their pockets. Why should they? Even street sellers clearly showcase on their stalls that they would prefer not to be paid in cash. In Kenya, it is not credit cards or even bitcoins that have killed cash, it’s phones.

Every second, over 900 Kenyans use a simple text to transfer money to one of the 20 million M-Pesa system users. In total, over 400 million dollars are transferred this way each month in Kenya, which represents around a quarter of the country’s GBP. More than 80% of adult Kenyans use their mobile phones to transfer money, which is more than anywhere else in the world. With M-Pesa, they can pay for shopping, bills or transfer money to family members. In Kenya, cash payments have been replaced with immaterial payments in almost all sectors of the economy.

A conjunction of favorable conditions

In 2007, Safaricom, Kenya’s first telecommunications provider that  holds 98% of the market, first launched M-Pesa (“Pesa” means “money” in Swahili). A system on which you charge money on your phone, and send it per SMS. Very quicly in Nairobi, people were all texting money.

Its launch coincided with a surge in mobile phone users in Kenya and other developing countries. Today, 87% of Kenyans have a mobile phone, which is at the same time a cause and consequence of the rapid growth in online payments.

It is not a coincidence if this rapid growth of mobile technologies happened in Kenya rather than in other places. It’s a result of the conjunction of favorable conditions: the development of telecommunications infrastructure, flexible regulations, and a good divide of population between urban and rural zones.

Although, in 1999 we wouldn’t necessarily have bet on Kenya. Telecommunications were quite obsolete there, the country only had 300,000 phone lines and mobile phones had only started being established. But that year, the state-owned telecommunications sector being not efficient, it was liberalized, and taken over by companies, Safaricom among them. It has grown exponentially since.

There are also sociological reasons for the success of the mobile payment system in Kenya. Firstly, almost all city-dwellers bring financial aid to family members who stayed behind in rural areas. Before, this money was given in person, often through unreliable intermediates or by traveling great distances. In a country where safety is not guaranteed in all regions, we can easily understand how a system of quick and reliable money transfer attracted big numbers.

When M-Pesa was launched, Kenyans did not have access to traditional banking systems. Thanks to the software, each phone becomes a sort of personal bank. Safaricom thus allows its users to substitute the banking sector. Despite many hesitation, the Central Bank of Kenya decided to let Safaricom freely develop its services. This in turn opened the door for Safaricom’s rival, Airtel and Orange, who launched their own mobile payment systems, thus enlarging the market.

Ruben Nizard, French economist specialized in sub-Saharan Africa, explains. “The strength of Kenya is that regulations are not as rigid and suffocating as in other African countries, where they clearly are an obstacle to the development of innovating sectors.”

Silicon Savannah

But it is not only thanks to mobile payments that Kenya asserts itself as one of the leaders (if not The Leader) of African technologies. We have to mention that the internet there is one of the fastest in the world. “In 2008 Bitange Ndemo, the minister for information and communication at the time, helped his country make a great leap forward: he collected a hundred million dollars using public and private funds, to install broadband in the whole country”, Ruben Nizard tells us. “This is a case for strong-willed policy. The stakes were high, because internet use wasn’t really anchored in the local culture.”

Today, more than 50% of the country is connected to the internet. Behind Egypt and South Africa and way ahead of countries like Morocco and Senegal, Kenya is the third country in Africa to have the most tech hubs, which are centers for innovation and ideal for startup growth.

The most famous of these centres is iHub, which has become a reference point in Eastern Africa and is sometimes called “Silicon Savannah”. Founded in 2010 by Ushahidi’s (meaning testimony in Swahili) ex-team, which was a site set up during the 2007 presidential election to signal acts of violence and avoid unrest, iHub is a research lab, an app testing facility, and a breeding ground for startups all at once.

Located in the heart of Nairobi, it welcomes thousands of geeks each year, and is the home to almost 170 startups. Among the local successes is the Ma3Route app, which allows users to follow the progress of urban traffic in real time, which is essential in Nairobi. There is also the Sky.Garden site, which was launched in May 2017 and has already raised over 1,2 million dollars.

Relative decentralisation

Nairobi is not the only place where young tech entrepreneurs meet up to give their projects a running start. Over the last few years, other Kenyan cities have also seen the emergence of innovation centers, like Mombasa (Swahili Box), Voi (Sote Hub), and Machakos (Ubunifu). Some centers are completely independent, others work hand in hand with universities and institutions.

But all of them have the same objective: to accompany tech and creation entrepreneurs. “The principal reason for this decentralisation is that Nairobi is starting to get saturated, as well as the cost of living being too discouraging for young entrepreneurs that do not have the means to live there”, Ruben Nizard explains. We have to remember that it is the system D that prevails in Kenya, because it is often young people that have no support from their family or private investors.”

Beyond financial contingencies, some entrepreneurs deliberately decide to leave Nairobi to create tech incubators in their native towns in order to support the local economy. We have to say that even when the Internet is fast, nothing can replace daily collaboration.

But outside Nairobi, there are obstacles that prevent hubs from being able to develop as quickly as in the capital: the internet is not as fast, business management experts are rarer, and young entrepreneurs are not able to sell their products due to lack of sufficient training. Truth be told, apart from bandwidth quality these issues are nationwide, including Nairobi. Sote Hub has become an important innovation hub in the city of Voi.

Siren’s Song

A certain type of amateurism and lack of concrete resources is halting the progress of Kenyan startups. Ideally, hubs should serve as training spaces for young entrepreneurs by teaching them about coding, compatibility, marketing… But there is a cruel lack of money. “It is a vicious circle: because these spaces are not viable, investors are reluctant to lend necessary money to their entrepreneurs” Ruben Nizard explains. “And the lack of a qualified workforce slows down the development of the local digital economy: only a few companies have known success, and they have a tendency to attract the country’s best programmers and developers, which prevents more modest companies to reach their potential. On the other hand private industry participants are, like in many African countries, complaining that many of the NGOs present in Kenya are using their big budget to turn many talented workers away from the private sector.”

To surmise, the bottom line is that it is hard to secure funding. Continued necessity has turned entrepreneurs towards Western funding: 90% of the Eastern African startups that receive funding count at least one European or one American in their founders. This raises questions about local entrepreneurs’ independence, who are condemned to yield a high percentage of their shares to Westerners in order to guarantee the continuation of their company. Technology changes, but the subservience rule stays the same…

Ruben Nizard underlines that “it is not for philanthropy that Google, Microsoft, or IBM invest in Africa a lot. It is because it is a massive potential market that is ripe for conquest, and these companies want their share of the pie. They are acting in character after all. Africa’s real problem, at that level and at other ones, are the States that are broke, badly governed, or simply deaf and blind when it comes to supporting entrepreneurs. Kenya is lucky in that it could be worse off, but this is not sufficient.

iHub is one of the country’s leading innovation centers. The boom in smartphone use as well as private and state investments in Kenya’s infrastructure have played a key role the development of the country’s digital industry. However, the benefits to local economy are not evident as of yet. The World Bank underlined in 2016 that, in order for that to happen, a new generation of workers must be trained for the innovation sector. This would in turn allow them to stay strong when faced with the siren song of bigger companies and foreign countries.

Concretely speaking, the entrepreneurs and their ideas are there. The government, private sector, and foreign investors need to work hand in hand in order to allow entrepreneurs to reach the end of their projects. The objective would be to open access to new financial resources, by creating alternatives to traditional banking adapted to their needs for example. In the meantime, don’t bring a big wallet to Kenya, because you are not only going to Kenya but also to the future.

Translated by Glenn Bastide