Nicholas P. Sullivan is a Senior Fellow at the Center for Emerging Market Enterprises (CEME) and a co-leader (with CEME Senior Fellow Kim Wilson) of The Fletcher School Leadership Program for Financial Inclusion, an innovative residency program designed for central bankers from emerging and frontier markets. Sullivan has been a Bellagio Fellow (winter 2011), a Visiting Scholar at MIT’s Legatum Center for Development & Entrepreneurship (2007/8), and a Visiting Fellow at the Feinstein Center (2008), as well as a recipient of grants from the John Templeton Foundation and Rockefeller Foundation.
His most recent book, Money, Real Quick: The Story of M-PESA (Guardian Books, 2012, co-authored with Tonny K. Omwansa), focuses on Safaricom’s M-PESA mobile-money network. M-PESA, which counts nearly 13.5 million Kenyan users – or around 70 percent of the population – is an e-money innovation that allows customers to send money electronically to family and friends via text message. People load or withdraw money through one of M-PESA’s more than 30,000 independent agents.
The growth of M-PESA has spawned a brand new financial services ecosystem in East Africa with startups and incubators, the beginnings of a Swahili Silicon Valley. For example, iHub, a Nairobi Incubator for high-tech startups hosts “pitch events,” linking startups to venture capitalists, much like Guy Kawaski’s Garage.com in the US in the go-go 1990s, when entrepreneurs would give 30 second pitches to potential investors. In its first year, iHub attracted more than 3,000 members and spawned 12 companies. This new Silicon Valley is firmly connected to global players like Google, Facebook, MasterCard and Nokia, adapting their products and services for non-Western cultures. For example, in 2009, Google launched its G-Africa Initiative to encourage software development in Sub-Saharan Africa.
This fast developing eco-system has spawned a range of Kenyan greenfields, as well as venture backed companies from the US that are setting up their headquarters in Kenya. Sullivan identifies two broad areas of enterprise innovation that are currently proliferating in Kenya’s Silicon Valley.
First, a whole new class of companies is starting to use M-PESA’s payment functionality (including Bill Pay and bulk payments) as the core of their business model and consumer proposition. The ability to offer mobile payments is an incentive to conceive of new approaches to old businesses such as education or microfinance and hopefully improve upon them. Sullivan profiles a range of innovative companies that are doing just this. From Musoni, the world’s first 100 percent mobile-powered, cashless, microfinance institution, to Bridge International Academies, which uses a ‘school in the box’ model with cashless mobile payment systems to bring quality and effective education to the extreme poor and Maji Ya Compiuta (Computer Water) which allows villagers to buy water with micropayments from a community water pump with M-PESA, companies across East Africa are identifying a variety of ways that mobile money can help reduce transaction costs and provide critical services to the poor.
Another class of greenfield companies connects mobile providers to the internet to facilitate payments and shopping. Sullivan calls these companies “new commerce” solutions. Companies like Cellulant and Craft Silicon, both Nairobi based, started operations before M-PESA but are now dedicated to mobile-money applications. Cellulant’s commerce 360 allows customer payments across multiple wallets (tv, utilities, bank payments etc.) plus real time settlements. Craft Silicon’s ‘Elma’ system allows customers to pay any bills, transfer money, select seats at events, among a range of other services.
Sullivan provides an exciting, fast paced study of the swirling and churning innovation stew happening right now in Kenya, taking the reader on a truly remarkable journey around this mobile high tech revolution. With mobile coverage only increasing in Africa and around the developing world, Kenya may very well be instructive of the types of innovations that will emerge across the world. Says Wolfgang Fengler, lead economist in the Nairobi office of the World Bank: “The revolution has only started…many more innovations will emerge—because information is the hardest currency in the 21st century and is now available to everyone at low cost.”
Sullivan is author of You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy (Jossey-Bass, 2007), which focuses on entrepreneurship and innovation in developing countries. He is co-author (with Fletcher Professor Jeswald Salacuse) of “Do BITs Really Work: Bilateral Investment Treaties and Their Grand Bargain” (Harvard International Law Journal, 2007, and Oxford University Press, 2009). Sullivan is also publisher of Innovations: Technology/Governance/Globalization (MIT Press).
Read a chapter excerpt from the book: "Swahili Silicon Valley"
-Profile by Kyle Muther, CEME RA and MALD candidate, F13