On the 11th anniversary of its entry into the market, Sérgio Gomes, CEO of M-Pesa, reveals the new strategy, recalls the achievements and lists the challenges facing the country’s largest mobile wallet operator.
That M-Pesa has revolutionised the financial sector in several African countries, from Kenya, where it was set up in 2008, to Mozambique, since it first appeared more than a decade ago, is nothing new. The issue arises with the brutal expansion of the use of the mobile wallet, which today has more than 6 million active customers, many outside the country’s major cities, and which has led to a strategic change that is already underway. From a provider of digital money exchange services to the main driver of financial inclusion for Mozambicans, this is the path that M-Pesa is following. Sérgio Gomes, the company’s general manager, explains how.
You recently held the second edition of FinTalks. What is the aim and intention behind promoting this type of debate?
On M-Pesa’s tenth anniversary, in 2023, we began a period of reflection. Not only for reasons of strategic review, but also to realign with our purpose and the reason for our existence. It’s obvious that there is a commercial objective, but there is a very strong purpose that has to do with financial inclusion, and there is a commitment that we made to civil society, to the Regulator and to other entities, that we would always be a promoter of financial inclusion for those who don’t have access to financial services. So last year we decided to reflect on where we had got to, how we had contributed and what we were going to do for the next 10 years.
And what conclusions did you draw from this?
One of the first was that what we’ve done is undoubtedly a great success. We’ve managed to have a presence in every district in the country, and in every administrative post you can find an M-Pesa agent or people with access to financial services. We’ve been able to start dematerialising physical currency into a digital environment that is more controlled and more secure and that can bring more value and benefits to the majority of Mozambicans. But our premise doesn’t stop there, and that was the second major conclusion – the gateway already existed, but the added value for everyone still didn’t exist.
In what respect?
We realised that there wasn’t yet a sufficiently robust offer to meet the needs of the rural population, and we’re working on that. I’m talking about fundamental services such as micro-financing, micro-insurance and savings services adapted to this population. So if we have a population that has access to a mobile wallet where they can put their money, make deposits, payments, withdrawals and transfers but that still can’t access financial services that are economically empowering and that can make a difference to the outcome of their lives and the opportunities they will have, we decided to adapt our strategy and go ahead with a review of the execution of our own purpose. We have maintained our focus on financial inclusion and increasing access, and on being one of the main promoters of this national goal, but we have recast our vision of it, and with some boldness, I have to say. We said last year that we want to be more than a mobile wallet and provide effective solutions that translate into value for millions of people who are still far from the financial system, especially in rural areas, and we’re doing it.
How does this new vision materialise?
People can’t just be depositors, there has to be a reason why they deposit with us. For us to have a viable digital ecosystem, there have to be various forms of interaction and transaction, payment and various applications, there have to be various aggregated services that have to respond to the reality of the population’s needs. In an urban environment, for example, with payments for Credelec, water, cable TV services or transport, this already happens. But in rural areas, people need other types of support to help them in their social and economic activity. And this is fundamental for us. When we looked at the rural issue and the real value we were bringing, we realised that the solutions are far removed from the value chains that exist there. Because 78 per cent of the rural population survives on agricultural activity, for example, and there were no digital financial instruments to support them in this activity.
‘We came to the conclusion that there wasn’t a robust offer to fulfil the needs of rural populations and that’s exactly what we’re working on now, with results’
Does this repositioning exist in all geographies or is this a Mozambican issue?
This thinking exists in all geographies, but Mozambique is a very specific case. Firstly because in demographic terms it is totally different. We are the most rural country of all the operations we have. All the others have large urban centres, while we have 66% of the population living in rural areas, and that alone is a big difference. Next, the weight of agriculture in Mozambique’s economy is much higher than in the others. Finally, the demographic and migratory issue, where Mozambique is also very different from our other operations. When we started in 2013, the recipe was to implement the entire strategy that came from the experience in Kenya, where M-Pesa was set up in 2007. And it was a success there because it was a solution for sending money over long distances, remembering that Mombasa and Nairobi have more than 50 per cent of the population there, people who migrate from the countryside to those cities. That’s not the case in Mozambique. Therefore, a business model that was aligned with this type of premise wouldn’t work, because these migratory currents are very scarce in Mozambique. Maputo is a small city in relation to the size of the country and the overall population. Nampula and Zambezia have 50 per cent of the population that isn’t moving south. So M-Pesa’s business in Mozambique is a particular case at group level, because it worked more on the payments side and not on the long-distance transfer side to replace the old methods of sending money to families.
Back to your strategic change. What has changed?
The rural population and the agricultural environment are vectors that we’re putting a lot of emphasis on now because we’re really trying to create solutions for their needs and in the midst of this thinking, we realised that there are countless entities in Mozambique with a similar purpose: financial inclusion. And we all have the same problem, we are orientated towards a common goal but working in isolation, or relatively isolated, and I’m not talking about financial entities, because there is a financial inclusion strategy that is promoted by the Bank of Mozambique and that brings the whole financial system together. But then there are NGOs, development organisations, private companies, the academic system and public bodies. All of them have a specific mandate or a specific purpose relating to financial inclusion and are following a programme with a common objective but in different ways, without much communication or integration between them. And we realised that we weren’t talking. So there was no active communication or active sharing between everyone and we weren’t managing to maximise what each entity was actually doing. So the first FinTalks was born out of the need to first get to know each other and understand what each one is doing in this regard, so that we can try to found a platform that is based on an annual conference that started in 2023, which brings all these organisations together, but which in the meantime has multiplied into a series of initiatives that continue to bring out the potential of the partnership between everyone with the same goal, the acceleration of financial inclusion in Mozambique.
What has already come out of this debate?
Firstly, and in addition to the strategic review that led us to think that, more than a portfolio, we have to give access to all those financial services that will actually have a positive impact on society, economic activity and economic empowerment. Just to give one more note on Fintalks, the programme has really evolved and this year, not only in terms of the showcasing we’ve done of the partnerships, we’ve also launched our podcast, in which we’re leaving Maputo to give a voice to all these entities around the country that have an impact on the path to financial inclusion. And we also wanted to integrate the university environment into all of this, as an engine of creativity and the generation of new ideas and solutions to accelerate financial inclusion by looking at the population as a whole. This year we had an experimental session in which we invited three universities. Next year, the aim will be to get most of the country’s universities and educational institutes to take part.
Then, with a view to creating services for this section of the population, you launched a ‘Super App’ that also follows this logic. To what extent?
Yes, it was presented at the first Fintalks, and this is very important because it has to do with M-Pesa being a platform that has to be open. We already had this prerogative through our Open API in which any organisation could, on its own, with sufficient knowledge, integrate its means of payment. And we also have hundreds of Mozambican developers registered with us who are qualified to carry out this development and integration for any organisation. The ‘Super App’ follows the same path, but here it is already an application, in which we have opened up space for any organisation to place a ‘Mini App’, thus creating an ecosystem of various applications and services for our customers.
What’s the big advantage of this?
A commercial acceleration of contact with customers that these organisations would not otherwise have. And on our side, we provide access to services that didn’t exist before, microcredit, for example, as is the case with Txuna, which is supported by Access Bank, micro funeral insurance, launched by Sanlam, or one more recently presented by the insurance company Hollard, in which M-Pesa users can buy car insurance quickly and conveniently on their app, among many other services.
‘For us to have a viable digital ecosystem there have to be various forms of interaction and transaction, payment and different applications that respond to the needs of the population’
As the platform we already are, we have 6 million active consumers and a subscription base that already exceeds 10 million and, on the other hand, we have all the companies that need to be able to reach these consumers, they need to be able to present their products and solutions to this public and also collect their payments in a simple way, and they can do this within our ecosystem. The ‘Mini Apps’ also work in a similar way to the Open API in that there is a development portal available to any developer in the country who, using the information there, can develop the application and then send it to us so that it can be published.
How many services are already available in this way?
We already have nine active applications and at the moment we’re launching one or two a month, but we expect to accelerate progressively over the next year to reach a hundred ‘Mini Apps’ very quickly.
And these applications are available via USSD, given that rural areas don’t yet have mass Internet access?
Yes, smartphone penetration in rural areas is lower than in urban areas. So when we think about platforms and the ‘Super App’, we can’t forget that reality. And to respond to this, our business as a platform has three channels, two of which are available in rural areas and, although they have some limitations in terms of user experience, they are robust enough to offer many of these benefits to the population that primarily uses USSD. And then there’s the network of agents that will start selling many of these services. We’re also going to invest in progressively empowering this network to provide more specialised services that require human contact within our platform. The specialisation we want to bring to the agent network extends to all services that require human interaction, which makes the agent network a fundamental element of the platform. And this completes what M-Pesa thinks of as a platform. However, all of this requires an acceleration in the digitalisation of these rural areas too. This involves education, which is very important, but also improving the devices used. Fortunately, our strategy is running in parallel with Vodacom’s to accelerate this and we have a service called ‘Pouco Pouco’, which involves financing smartphones for the rural population. And then the path will be to extend the services. If in an urban environment it makes sense to have a service like Txuna, which is consumer finance, in rural areas it makes sense to create financing services linked to agriculture, for example, and here the network of partners on the platform is fundamental. There are already some experimental models in progress, for example with Portucel Mozambique, where they are creating payment solutions with associated financial services using our platform. That’s why M-Pesa has opened up to seek out as many partners as possible in order to expand access.
Can banks be a partner in this strategy?
It already is, as I said, through Txuna, but there’s room for more, of course. The biggest problem that we continue to identify, and this is associated with some stagnation in the growth of the banking sector in terms of inclusion of the population, is that there is a list of services that are predominantly provided by banks that the general population still doesn’t have access to, precisely because of the inefficiencies that the capillarity of the banking system has at the moment. Because the reality is that the number of branches hasn’t increased and the number of ATMs has fallen quite noticeably in recent years. This means that there can be ever greater integration between the financial system and mobile wallets so that we can start to bring in these services and increase capillarity. This will be the great exercise that has to be carried out over the next few years and that’s where we want to continue to be leaders. I believe that there has to be a progressive adaptation of the banking system to offer more services through these channels, to integrate better and open up more to mobile wallets, but there also has to be space and a favourable regulatory framework for this to happen so that we can start creating financial instruments that can support the economic growth of the low-income population. And that’s where we have to turn, that’s also what financial inclusion is about.
Because that’s what financial inclusion is all about, including…
Yes, we believe that financial inclusion is a broader concept than just the number of branches, ATMs, POS, or the number of people with bank accounts and mobile phones. We understand the concept as the number of people, entrepreneurs, micro and small businesses with access to finance, the number of people with insurance, or with a savings account of some kind. These metrics are fundamental to measuring the effectiveness of what we’re doing. The platform is open and available so that banks’ services can be processed and placed, and our entire client base is available. We, M-Pesa, have no ambition to be licensed to finance or acquire deposits. Our business is to allocate and guarantee access and create a platform where organisations can interact. And it has been created. Therefore, at the moment we are fully open to any financial organisation being able to offer its services through our platform and thus help to include millions of rural Mozambicans in the financial system.
Where will M-Pesa be in five years?
Our plan is for it to effectively be a platform that provides services that add value to the entire rural environment, with the specific functions that need to exist there, and much more adapted to this reality of millions of people. So that the majority of the population we see today has access to a mobile wallet, and can take advantage of financial services and instruments that have an impact on their activity and their lives. That’s what we believe in and what we’re working towards.
Text: Pedro Cativelos – Photo: Paulo Alexandre
