Doing Well by Doing Good: Ripping off the Poor in East Africa

 #369 – January 8, 2016

African Great Lakes Initiative of Friends Peace Teams


1The M-Kopa Solar Lighting System


Note: As I have reported before (see Burundi’s Civil War Reignites at aglifpt.org/rfk/?p=729 – Dec.18, 2015), the situation in Burundi continues to deteriorate and I doubt that this crisis is getting much coverage in the western media. To better inform people, AGLI is sponsoring a tour this spring by Elie Nahimana, the Administrative Coordinator of the Healing and Rebuilding Our Communities program in Burundi. His speaking topic is “The Crisis in Burundi and the Quaker Response”. If you would like him to speak at your meeting/church or your community, please contact me at dave@aglifpt.org. For more details, I have attached a flier on Elie’s speaking tour.




East Africa, comprising Kenya, Tanzania, and Uganda has a population of about 130 million people. In Kenya, only 23% of the population is connected to grid electricity, in Tanzania 15%, and in Uganda 18%. Therefore there are over 100 million people in the region without access to grid electricity. Consequently there is a large need for small, home solar systems.


Safaricom is the biggest, most profitable company in East Africa. It began as a cell phone company but then expanded to supplying internet data through a modem which is what I use. In 2007 it was the first company in the world to initiate mobile payments though a system called M-Pesa (Mobile money). It has become astoundingly successful. Almost one-third of the daily Kenyan GNP moves through mobile money systems. It is even replacing the use of debit/credit cards since it is so easy and convenient to use. We pay our electric and satellite dish bills through M-Pesa which keeps us from having to travel to Eldoret to pay bills in person.


More recently, in 2012, M-Pesa developed a banking service, called M-Shwari (Mobile Calm). Here a person who opens an account can move funds from their M-Pesa account to save in their M-Shwari account at a rate of 2% to 5%. Account holders can access a loan for 30 days for a fee of 7.5%. The amounts are small and vary in relation to the credit history of the individual. There is only a 2% ninety day default rate. Note here, though, that the “access fee” of 7.5% for 30 days is the equivalent of 90% per year of interest – this high rate is the reason it is called a “fee” rather than “interest”. Currently, there are 10 million account holders in Kenya for about 7.5 million different individuals. Since the Kenyan population is about 45 million and half are children, this means that almost half the population has an M-Shwari account. Gladys has an M-Shwari account, but we would never borrow funds because of this extremely high “access fee.”


With these successful enterprises under their belt, Safaricom needed new “worlds” to conquer. Also in 2012 the same people who developed M-Pesa moved on to develop M-Kopa (Mobile loan). They targeted those 100 million people who don’t have access to electricity, many of whom live on $1.25 per day and their research showed that many spent up to 75 cents per day on kerosene, batteries, and cell-phone charging. So they developed a solar light system which provides two LED lights, a port for charging cell phones, a solar powered flashlight and radio together with an 8 watt solar panel and sufficient battery (see picture). This is where Safaricom is doing “good.” This package is not so unique as there are a number of companies selling comparable systems. What is unique is the purchasing arrangement.


The customer puts down $35 and then pays 50 cents per day (less than he/she would spend for kerosene, batteries, and cell phone charging) for 365 days and then owns the system which is guaranteed for two years. The “loan” works because the system has a SIM card connected to the person’s M-Pesa account that withdraws the 50 cents each day for payment. If there are no funds in the M-Pesa account, then the system is turned off until the customer makes the payment though the M-Pesa account. By the end of the year, the customer will have paid $217.50 for the system.


M-Kopa is now selling this system not only in Kenya but also in Tanzania and Uganda. They report that they have sold 280,000 systems and project to sell 1 million by 2017. Right now M-Kopa is selling 500 systems per day. Starting this year they also plan on selling a 16 inch solar powered TV and I have heard that they may also sell small refrigerators under the same “loan” system.


Why is this “ripping off the poor?” The Daily Nation newspaper has an advertisement for an equivalent system for $65.00. In other words, the M-Kopa customer is paying $152.50 or 235% extra for the one-year “loan.” M-Kopa and Safaricom are here doing “very well”. They have already generated an extra $42,700,000 from the 280,000 systems they have sold. Yes, Safaricom is a profit-making company, but these “charges and profits” are fleecing their poor customers. This is the face of capitalism for the poor in Africa.


Yet this hides a bigger issue: M-Kopa has six investors listed on their webpage who undoubtedly are planning on making a nice return on their investments. The more worrying aspect is that their webpage also lists eleven “partners.” These include the Gates Foundation, UK’s Department of International Development, some foundations, and Franciscan Sisters of Mary. In other words these “profits” are being generated by the non-profit world. Alarmingly this is one of the major trends in international development. Could M-Kopa have been developed without free development funds? More critically should profit-making companies be subsidized by the non-profit sector in order to generate substantial profits? Most of these profits are going to be syphoned out of East Africa and sent overseas, perhaps to tax havens. I know of many examples like this. This is why East Africa remains underdeveloped. It is being looted.




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Please donate to AGLI’s programs by sending a check made out to “Friends Peace Teams/AGLI” to Friends Peace Teams, 1001 Park Avenue, St Louis, MO 63104 or go to our webpage at www.friendspeaceteams.org to donate by debit/credit card.




Since 1998, David Zarembka has been the Coordinator of the African Great Lakes Initiative of the Friends Peace Teams. He has been involved with East and Central Africa since 1964 when he taught Rwandan refugees in Tanzania. He is married to Gladys Kamonya and lives in western Kenya. David is the author of A Peace of Africa: Reflections on Life in the Great Lakes Region (available at www.davidzarembka.com).


David Zarembka, Coordinator

African Great Lakes Initiative of Friends Peace Teams
P. O. Box 189, Kipkarren River 50241 Kenya
Phone in Kenya: 254 (0)726 590 783 in US: 301/765-4098
Office in US: 1001 Park Avenue, St Louis, MO 63104 USA 314/647-1287
Webpage: www.aglifpt.org   Reports from Kenya: www.aglifpt.org/rfk/

Email: dave@aglifpt.org















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