Michael Joseph clarifies how M-Pesa began in Kenya after test in Thika

Former Safaricom CEO Michael Joseph has opened up about how the telco's popular mobile money platform M-Pesa came into existence.

Speaking at a business forum in Nairobi, Joseph stated that M-pesa was conceptualized by Nick Hughes, the co-founder of asset financing platform M-KOPA, when he served as the Head of Social Enterprise at Vodafone, which owned 40% of Safaricom,  in 2003. 

"There are many fathers and mothers of MPESA and I actually call myself the mother of M-Pesa. In 2006, a guy named Nick Hughes, who actually started M-KOPA, came up with the idea," said Joseph.

Joseph said that at the time, Hughes wanted to come up with a product that would better the distribution of microfinance loans in Africa and he submitted a grant proposal on the same to the UK Department for International Development (DFID) which was approved.

" Nick applied for the grant and came up with the idea for the microfinance industry to use a product that could disseminate tiny loans and then repay those tiny loans. Because the repayment and management of loans in micro-firms is quite expensive he came up with the idea to use mobile phones to do this," said Joseph.

Hughes attempted to convince other Vodafone companies to test out the prototype but his peers were not convinced of its viability. With no one left to turn to, he approached Joseph, the then Safaricom CEO.

"He tried to flood this to all the other Vodafone companies to test it somewhere and sadly nobody wanted to do it so they came to see me and because I wanted the company to be innovative I said okay; let's try it and we tested it in Thika," said Joseph.

Despite the fact that the prototype was initially designed for paying back microloans, users in the test market started using it to transfer money to one another.  

"So we tested with the microfinance company and it was successful but what would happen was people would receive the money from the microfinance company but they also had a facility and manual structure that they could send that money to somebody else who was the real recipient," said Joseph.

"The people using this thought it was wonderful so my staff came to me and said why don't we do more of this and that's when we decided to change that product to be what is now called M-Pesa."

Joseph's peers were however still not convinced that he could make a profit out of the product.

"They said that it was an absolute waste of time but I didn't want to make money out of this. I thought it would be a product that would help people change people's life for the better and therefore they would stay with the company," he said.