The colonial geographies of Kenya’s fintech boom

Digital and mobile finance applications have boomed in Kenya over the last decade. Mobile money, Vodafone’s M-Pesa system in particular, is ubiquitous. Kenyan banks and smaller start-ups have led the adoption of a wider range of mobile and digital financial applications.

For promoters of fintech as a tool for development, Kenya is a paradigm case. Estimates from Tavneet Suri and William Jack – suggesting that the advent of M-Pesa had directly moved 194 000 households, equivalent to 2 percent of the country, out of extreme poverty – have been triumphantly cited across a wide range of media reports and policy documents. The rapid adoption of mobile and digital finance, according to advocates, has allowed Kenya to ‘leapfrog’ the developmental constraints of its existing financial system. In the words of one author: ‘new technologies solve problems arising from weak institutional infrastructure and the cost structure of conventional banking’.

There are good reasons to question this rosy narrative, as recent critics have demonstrated compellingly. Among others, Milford Bateman and colleagues raise a number of important methodological and other objections to Suri and Jack’s claims, and Serena Natile shows how narratives of ‘inclusion’ mask the perpetuation of gendered patterns of exclusion and inequality. Wider applications of fintech in Kenya have come in for critique as well. Kevin Donovan and Emma Park highlight emerging patterns of digitally-enabled over-indebtedness. Laura Mann and Gianluca Iazzolino trace the emergence of monopolistic corporate power enacted through the extension of digital platforms (including for finance) in Kenyan agriculture. Ali Bhagat and Leanne Roderick show the emergence of new forms of racialized dispossession and exploitation through efforts to extend fintech applications to refugees in Kenya.

On a more basic level, ‘leapfrogging’ narratives have to contend with the fact that the geography of Kenyan fintech looks a lot like that of the financial system more generally. The fintech boom is predominantly an urban phenomenon, and especially concentrated in Mombasa and in and around Nairobi. Data from the 2019 national ‘FinAccess’ survey shows that 6.6 percent of respondents currently or had previously used of mobile lending services, and 6.4 percent reported the same of digital lending apps. The corresponding figures among urban residents were 17.2 and 11.4 percent. The proportion of residents in Nairobi Metropolitan Area and Mombasa using mobile money services (25 percent) and digital lending apps (18.2 percent) is more than double the respective use rates of mobile (12.3 percent) and digital borrowing (7.1 percent) among urban residents elsewhere.

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When does state-permeated capitalism work?


In recent years, state capitalism has become an important buzzword in the development economics discussion (again). In view of the very different ways in which this term is used, Ilias Alami and Adam Dixon recently highlighted the dangers of using the term too loosely in an article in Competition and Change. In view of its recent popularity, state capitalism could suffer a similar fate to the terms “neoliberalism” or “financialisation” by becoming a very loose rallying cry without any significant analytical value. To overcome this problematic situation, Alami and Dixon propose that future research should (1) develop a theory of the capitalist state, (2) circumscribe the time horizons of state capitalism, and (3) locate state capitalism more precisely in territorial and geographical terms.

Although I am not sure whether the genius can be put back into the bottle by developing a unified theory of the state (too many different theoretical traditions are involved by now), I am very sympathetic to the latter two demands. Our recently published book “State-permeated Capitalism in Large Emerging Economies” (Routledge) is a modest contribution to the latter goals. It deals with the economic development of Brazil, India, China and South Africa between 2000 and 2015. Departing from a comparative capitalism perspective, we have developed an ideal type of state-permeated capitalism as opposed to liberal, coordinated and dependent capitalism – and examined to what extent large emerging markets are approaching this ideal type. Read More »