The Father Of M-Pesa: One On One With Stephen Nduati Mwaura

Never have I ever – interviewed anyone quite like Stephen Nduati Mwaura. He approaches with a masked face bearing files, folders, and is that a framed picture of him with former President Mwai Kibaki that I can tell has a place of pride in his home? He pokes fun at his bald head, contrasting it with my massive jungle of red curls. He is here to tell me The Story Of M-PESA.

As we settle in, I ask why there is relentless talk of this one M-PESA founder dude who got shafted by Safaricom for his creation and is now missing out on billions. He actually scoffs. “That is nonsense. That is the kind of stupidity that the media brings. It is silly. Remember, things have to converge to work. M-PESA software development was done by a company in the UK. There are a lot of factors in place and I am probably one of the people who knows all the factors. Or at least a good fraction of that. People who say this think M-PESA started here. No, it did not. There were things which were here, and there were things we needed in the UK. We needed someone to tamper with the SIM. The SIM company got intellectual property from it.”

It is a beginning that sets the tone for the rest of the interview. But this tale, I quickly figure, comes with rules. Rules I discover the moment I attempt to steer the narrative.

1. No asking questions.
2. Mwaura will ask me the questions.
3. I am expected to engage intellectually.
4. The narrative will flow in chronological order exactly the way he intends to tell it.

Let us begin.

It starts with a letter. But of course, Mwaura would say I get ahead of myself. First off, he looks nothing like YouTube says he does. He is a case study in burnout. “I left Central Bank in 2017. (He joined in 1992). I am actually a much better person than I was. I can honestly tell you that I am much healthier and much more relaxed. I hate to think that I spent so many years in a stressful environment. I start every morning working for my body, not for other people. I do an hour or two of exercise,” and could do with a street corner and a bullhorn and tell as many people as are willing to hear.

“I left CBK was to restore my energy, which I had lost. High blood pressure and sugar levels – people who see me now ask if I am the same person. Now the numbers are much better. I am actually younger. (It is indeed true. He does look 10 years younger). In life, start with yourself,” he tells me almost by way of a warning, I nod vigorously. Underneath the Zen is far more work and way more opportunities than he has ever had on his plate. Only now he handles it like a pro.

When he joined CBK, he was hit with a severe case of culture shock. His first degree was mechanical. Then he realised roads were in disrepair for lack of equipment. Naturally, he turned to The Economist. Here, he came across an MBA. Everybody in the world was talking about it.

“It occurred to me that I needed to do one. I applied for an MBA in the US. My ministry did not want to sponsor me because they only sponsor engineers, not managers. That whole thinking in silos thing. Management was never thought of as an important course. All the same, I got a scholarship, went to the US and my family sponsored me. It was here that I picked up the qualifications for the role that I would eventually have at the Central Bank of Kenya. I was not just a regulator. I was an MBA.” His focus was Finance and International Business.

He religiously read, and still reads, the Wall Street Journal and the Harvard Business Review – daily. Something caught his attention – the seed of entrepreneurship. With that, he grasped an even more significant something; the power of institutions and how they can change things. It was not, he observed, about the power of the individual. Not the way it was back home in any case. This is an epiphany and became a life-altering moment for Mwaura. He shrugs it off in the spirit of Socrates. “I know that I know nothing,” he declares, “and that makes me the wisest man.”

In possession of what would now be considered a grotesque flaw, Mwaura returned home because he felt he had a role to play here. Because he was that thing we sometimes feel shamed about – a patriot. “If I were really selfish, I would have stayed. Of course, America has two sides to it. You can be very successful financially but socially there are big issues. I did not wish to stay in such a social mess.”

Coming back home in 1990, he is welcomed “by riots every Wednesday. You know how the 90s were.” A bank in New York had recruited him as an IT Auditor. Part of his MBA included IT. He gave that up, got a part-time job with an IP solutions company. At the time he had also sworn, despite, or perhaps in spite of his patriotism, that he would NEVER work for the government.

School was designed to bring him closer to multinationals. Except by the time he returned home all multinationals had folded. Even parastatals were having issues. He was loathe to work for the government so much so when he got a job at CBK, he told himself it was technically a parastatal. It was not an auspicious beginning. Part of the stress came from the new Governor, … Fresh from the US, Mwaura was aware of a superiority vibe. He says he knows exactly what that is like. It is easy to deem locals inferior, and he had to work at not being a jerk about it.

Readily identifying CBK as a political institution, Mwaura points out that “many within CBK align themselves with the government. It was not a meritocracy, so for someone like me, the biggest challenge was management. Bureaucracies do not advance management. Who they call a manager should not be called such. It is about rewarding people politically. And when there was an election, people divided along political lines. There is no unity of purpose.” It is The Peter Principle.

The Peter Principle 

The Peter Principle – you are promoted right up to your level of incompetence. “Based on the paradoxical idea that competent employees will continue to be promoted, but at some point will be promoted into positions for which they are incompetent, and they will then remain in those positions because of the fact that they do not demonstrate any further competence that would get them recognized for additional promotion,” explains Investopedia.

“The one thing I can say about CBK is that it has a lot of knowledgeable people. I miss working with that. The equation, however, rests too heavily on who is the Governor. And these laws were written when the Governor was a King and people wanted to align themselves with said governor. So, ideas never get there.”

Mwaura is an intense advocate for enabling environments and not being in one spurred him to create it for others. “In Kenya what we were building was institutional capacity. I don’t know if they (CBK) have done anything with regulations since I left. Now when people come with complicated structures, ‘No’ is the safe answer. ‘No’ has no risk. The tendency of many regulators is to say ‘No’ because for them as individuals, there is no risk. And with that response, their work is done.”

Back to the 90s where banks were flailing. The balance sheet of a bank is 70 per cent to 80 per cent of other people’s money. Banks took great risks with this money which went into loans. That is where the failure was. How to regulate a bank became a triad of Kenya, the UK and the globe to curb the banks’ appetite for Russian Roulette.

During this time at CBK, he was inspired to study law, thinking around how to become more independent, going in for an LLM. in Law and Development. Fast-forward to 2002 when he left CBK, joining Professor Anyang Nyong’o as part of the team that drafted the Economic Recovery & Wealth Creation, as well as forming part of the John Michuki committee, helping pen the legendary Michuki rules.

“I am an expert in regulations. We were looking to creating enabling regulatory environments. I was part of writing that chapter. It was about moving from dependence on government to dependence on institutions.” There is a brief stint as a middle manager at Payless. MPESA starts in 2007, finding him back at CBK. When I was in payments, (he was Head, National Payments System), we received a letter from someone wanting to do something on technology. My then boss would reply very quickly, and in my opinion, very naively, but still quickly and efficiently.”

His bafflement was deep. “You have applied to do something in money. According to the Banking Act, anybody who wants to do anything with money is licensed as a bank. So, apply for a bank license. But I went through those files, and was, thanks to my work with Michuki and Prof, Nyong’o, looking at CBK from a different perspective. I started thinking, this institution is wrong.”

Steadily, then faster she grows

Now, I need you to keep up because things start moving really fast from this point. Someone called from CBA, saying they have a product Faulu Kenya want to do. The idea of M-PESA starts with Faulu Kenya. Why? Their merry-go-rounds require regular meetings to disburse funds. This proves very difficult and they explore ways to pay. They were being supported by FSD Kenya. Safaricom, simultaneously, is working on a product with CBA bank and hitting walls. A call comes through to CBK. It is put through to Mwaura. The person at the other end of the line explains the dilemma. What do we do with this request for something that does not legally exist? Mwaura asks to see the request letter. It is sent to him via email. He reads it and stays schtum. This letter was from Faulu Kenya. It finds its way to the Financial Inclusion desk.

Parallel to this, the Governor, Dr Andrew Mullei, (2003 – 2007), knows a guy from the Kenya School of Monetary Studies. Dr Alloys B Ayako. Put a pin on that because we are going to circle back. Dr Ayako and FSD Kenya are invited by Safaricom to come see a new product. Safaricom had by then seen beyond the product they initially shared with CBA, into a future of money transfer. Somebody told Mwaura about the meeting. He makes time for it. In this meeting they are shown how M-PESA will work using bottle tops to describe agents, loading and sending – the whole model was explained.

The CBK crew in attendance has a team from the Supervision who asked, was this not deposit-taking and do they not need a banking license? Mwaura walks out in the company of one David Ferrand, then Director of FSD Kenya. They had worked together in the past. He astutely tells Ferrand that the regulators would not say yes. Ferrand challenges him. What was he going to do about it? Mwaura went back and formed a committee with him as chair. Now we come back to Dr Ayako. He becomes the conduit, informing the government of the goings-on. In tandem, Mwaura asks Ferrand to please find and send along his was anyone who knew about mobile money in the world. Ferrand finds a guy. Safaricom is in the meantime trying their darndest to get licenses from Communications Authority and getting a resounding ‘No.’ Mwaura dives into the world of Payments.

Somewhere along this journey Dr Bitange Ndemo, then Permanent Secretary was tagged. He became it, writing to CBK, asking them what their grand plans were with regards to mobile payments. Mwaura, immersed in Payment land, is working with Ferrand’s guy and his team tackling a raft of issues ranging from agency, technology, banking, payments, regulations, cybercrime – all the glorious headaches M-PESA carried with it. Then a meeting is called that brings together stakeholders. Mwaura gives his presentation, concluding that this was about payments, not banking. And these are two distinct entities. Safaricom in their never-say-die quest end up at CBK, talking to Supervision. They may as well be singing to a rock. By now, Faulu Kenya had slowed down with their idea.

Mwaura gets an opportunity to go to South Africa. Meeting someone from Vodafone who says there is a law in the UK called E-money Issuers Regulations. Get that law, he is told. South Africa is at that time home to Wyzzit, a product similar to M-PESA and suffering the same fate at the hands of regulators. He does his presentation there. It is now 2006. He gets invited to Washington. He discovers that the Filipino have a product where you send money to a card to load it then withdraw using the card. It is almost but not quite. He comes home with an instinct for regulating mobile money. He is going to work with the government on it. There is just one slight problem. His ally, Mullei, is no longer Governor. Jacinta Mwatela is now acting Governor. “She was the most conservative governor. She did not want to change anything. She has a soft heart for poor people. On the one hand, when you talk about financial inclusion, she is happy. But on the other hand, when you talk about technology, she’s saying no.”

Permanent Secretaries Joseph Kinyua, Ministry of Finance, and Dr Ndemo declare that there is need for a meeting. The latter pushes mightily. It is convened. Treasury gets involved. Person writing minutes is from Supervision. At the end of writing the minutes declares “but we do not have laws for this.” Mwaura is savvier now. He knows things about mobile payments. Amazing things. He asks for a change of the minutes. It is done. “We said that under Payments, CBK is authorised, courtesy of an amendment done in 2003. He merely needs to stipulate the conditions.

“The letter that was supposed to be drafted by Supervision, came to Payments. It became a Letter of No Objection. We did not give them a license. We did not give them authority. We gave them no objection. That is something that had never been done globally. This letter is known worldwide because of that. Why did I know how to write it? Law. I had studied it. If something is not provided for in law, you give a Letter of No Objection. We simply set the conditions and gave them leeway.”

Except Mwatela would not sign it. The fates aligned once more, and Dr Ndemo pushed Kinyua who pushed Mwatela finally getting her to sign. It is March 2007. “That was the most important happening that happened in this country. How Safaricom got that letter. That’s a book.”

Are you going to write it? I ask

Yes, he says. I tell him I will be on his case.

This article was first published in the October 2020 issue of CIO East Africa magazine.