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A mobile banking service is transforming how the poor transfer money - here's how it works

A mobile banking service is transforming how the poor transfer money - here's how it works

GiveDirectly is a charity that delivers cash right to people's mobile phones. Agrippa Agida Onywero Krispo is one such recipient.

M-Pesa works similar to Venmo or PayPal —except you don't need a smartphone or a bank account. GiveDirectly sends Krispo the monthly payment via his phone. He can use the app to withdraw, deposit, and send money.

When GiveDirectly sends the money between the 5th and 7th of each month, it's just a few taps before Krispo can bring up the confirmation notice on his phone.

That screen lets him know the money was safely transferred to his M-Pesa account.

Scattered around town are M-Pesa stands, outfitted with live agents who can dispense money — essentially an ATM with a human teller.

This is one feature that sets M-Pesa apart from Venmo and PayPal, which can only sync with users' bank accounts.

For a recent August withdrawal, Krispo's phone confirmed he visited the agent and took out the 2,250 shillings (or $22).

I still wanted to see how the transaction happens, so GiveDirectly's Caroline Teti brought us to a nearby M-Pesa stand.

This one was miles from the village, but the one Krispo and his neighbors use is a short, 7-minute walk from the entrance of the village.

Teti needed to deposit 1,000 shillings into her account.

The system is straightforward: Teti (the user) opens her app, enters the "agent number" tied to that particular kiosk, and keys in the amount she's depositing.

The M-Pesa agent's phone then gets a notification prompting her to save the 1,000 shillings that Teti wired over. If Teti were withdrawing money, the process would be the same except in reverse.

There is a small fee for each transaction. For the amount given to GiveDirectly recipients, this fee is 30 shillings. (GiveDirectly actually wires 2,280 shillings each month — 30 shillings above the 2,250 recipients can spend — to cover the cost.)

Once the transaction goes through, the agent's phone notifies her it was successful. Teti's phone also pings her to confirm everything went smoothly.

The final step is decidedly low-tech: The agent enters the transaction into a logbook for safe record-keeping.The threat of petty crime still necessitates some old-school precautions.

This system is all over Kenya — approximately 80% of mobile banking is done through M-Pesa. People use the platform to send money to each other for personal debts, pay for groceries, and gamble on sporting events.

For people like Teti, who are working full-time at a major organization, it's allowed for greater convenience in handling money. For people like Krispo, it has enabled a bold experiment in basic income to change his life.