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How MPESA works

woman at mpesa agent shop

MPESA started in 2007 as a solution for unbanked Kenyans to send money to each other. It is now the world’s largest financial technology by subscriber base hitting 50 million users in September 2021. The mobile money transfer service primary market is Kenya. Anyone planning to do business in Africa or with an African must know how MPESA works.

The service now connects individuals, financial institutions, government institutions, international money transfer services among others.

How did MPESA start?

The history of MPESA is quite controversial if you asked any Kenyan on the streets of Nairobi. We have covered the evolution of the giant money transfer service here.

However, the concept of MPESA was simple. It was invented at a time when feature phones had massively penetrated into rural Kenya. Most Kenyans were not formally banked. But many had mobile phones.

Imagine a daughter working in Nairobi and wants to send the unbanked parent some money in Kisumu, about 400KM away.  One option was to go to the Kenya Posta and send the money using the defunct Money Order service. This meant the recipient would use more cash for transport to go to the postal office and retrieve the cash.

The other option was to buy airtime and then sent it to the recipient in Kisumu. Then the recipient would resell the airtime to convert it to cash. Remember that even sending airtime directly (what is commonly referred to as Sambaza) was not a thing then, one had to send the digits as an SMS.

What if you eliminated the hassle of buying and sending airtime, and instead just sent the money ‘directly’ to someone’s phone? Sounds crazy, but that is what happened.

This is how MPESA works

MPESA is a service offered by Safaricom, East Africa’s most prestigious company and a Forbes 2000 largest companies in the world. If you want to use MPESA, do the following:

Crediting your MPESA account

  1. Buy a Safaricom SIM card from an approved vendor. Remember SIM card fraud is common in Kenya, that is why you have to buy from approved resellers. Your identity details and your ID/Passport will be required.
  2. Activate the SIM card and MPESA services. Place the SIM card in the phone. If you are using a smartphone, go to the SIM Tool Kit and you will see MPESA Services. For feature phones, just look for Safaricom, then MPESA. Remember, activating SIM card is not the same as activating MPESA.
  3. Deposit money into your MPESA account. Go to the nearest MPESA shop (these are independent vendors approved by Safaricom to handle cash transfers.) Give the MPESA shop attendant any amount of liquid money starting from KES 49 – KES 300,000. The MPESA attendant will ask for your MPESA activated phone number, and your identity documents.
  4. Receive money in your MPESA account. The MPESA shop attendant will then transfer the same amount of money you gave from their bulk account onto your MPESA account. You will receive a message instantly showing the amount of money you have received. You can keep the money in your account for as long as you want, or you can transfer it.

Transferring money from MPESA account

You can transfer the money from your MPESA account to a bank account, use it for shopping, pay bills, or send it to someone else.

How to send MPESA money to another person
  1. Go to your MPESA account
  2. Select Send Money
  3. Enter the phone number of the recipient. You can send money to both MPESA activated and Inactivated phone numbers at different rates. You can also send money across networks such as to Telkom, Airtel and MTN among others.
  4. Enter the amount you want to send.
  5. Enter your MPESA PIN and press Send. MPESA will by default show the name and number of the recipient for you to confirm within 25 seconds.
  6. If you entered the wrong number, press any number or letter on your phone to cancel the transaction within those 25 seconds.
  7. You will receive a message showing debit amount from your account, cost of the transaction and remaining amount.
Shop or pay bills using MPESA
  1. Go to your MPESA menu and select Lipa na MPESA
  2. Choose the correct payment method. Verify with the vendor the service they are using out of the following options: Pay Bill; Buy Gods and Services; Pochi la Biashara.
  3. Enter the Pay Bill number, Till number, or Mobile phone number depending on the option the vendor is using.
  4. Enter amount
  5. Enter MPESA PIN
  6. Send.
Transfer MPESA money to bank account
  1. Transfer MPESA money to bank account
  2. Use the correct USSD to access the bank services on your MPESA account. A list of bank USSD codes is here.
  3. Or you can use the bank Pay Bill numbers
  4. Put the correct bank account number after following the process in (2) above if using a Pay Bill.
  5. Verify and send

Withdraw money from your MPESA account

To withdraw money, go to an MPESA shop, bank, or ATM.

  1. Go to MPESA menu and select Withdraw Cash
  2. Select either From Agent (MPESA shop or bank) or ATM
  3. Enter the Agent Number. Every MPESA shop agent has a unique number.
  4. Enter amount of money you want to withdraw.
  5. Enter MPESA PIN and confirm withdrawal.
  6. The Agent’s bulk account will be credited with the cash from your MPESA account. The Agent will in turn give you liquid cash equivalent to the withdrawal.

Other things you can do with MPESA

These are just a few of the basic things you can do with MPESA. The options are diverse. If you are a traveller and ever find your self in Kenya, instead of credit cards you can always use MPESA almost anywhere.

Feature photo/ Business Daily Africa
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