Electronic Currency in Africa: M‐pesa as Private Inside Money

Abstract

Electronic monies such as Bitcoin and mobile money have become popular in recent times. However, unlike with bitcoin, attempts to classify M‐Pesa theoretically have been rare. This article classifies M‐Pesa as a privately issued inside money, which evolved as an entrepreneurial response to the lack of traditional monies. It describes the institutional framework within which M‐Pesa and other monies evolved while highlighting how competitive forces led to mutual acceptance of competing inside monies, lower prices as well as greater choice for consumers. The case of M‐Pesa and other electronic monies illustrates the potential even today for entrepreneurial and market processes in money given the right institutional setting, especially in developing countries.

Bitcoin, currencies, and fragility

“…For practitioners of quant finance, the most effective inflation hedge can be a combination of bets which includes short positions in government bonds. † Likewise, the M-Pesa mobile currency used as tender in Africa is associated with transferable airtime minutes (Nair and Emozozo 2018). People can do microfinance via cell phones.…”

Bitcoin, Currencies, and Fragility

“…When we apply the law of one price to currencies, we realize using basic arbitrage arguments that the recent globalization does not allow for different currencies to coexist in the same marke: one must win. 16 Likewise, the M-Pesa mobile currency used as tender in Africa is associated with transferable airtime minutes [17]. People can do microfinance via cell phones.…”

“…In the parable of the Christ in the temple, Jesus kicked the money changers out of the temple of Jerusalem... Now one wonders why were there were money changers in a place of worship? The answer is that the temple took for currency only the shekel of Tyre, known for its 90% silver content and its ancestral quality control [19] 17 .…”