Nairobi — Kenyans could soon be sending each other money over the phone for as little as Sh20.

The Central Bank of Kenya is expected to approve the introduction of a low-cost money transfer system from Safaricom in the next few months. The system will end years of relying on money orders, postal orders and couriers to move cash from one place to another.

"We have already carried out a hugely successful pilot project in Thika with 400 people," Safaricom Managing Director Mr Michael Joseph said over the weekend.

The product, branded M-Pesa will also open new opportunities and possibilities with the use of digital money. Customers will one day be able to borrow money, pay for shopping or other bills, and even manage a cash account using their phone.

Kenya has about 6.5 million mobile subscribers and is growing this number in rural areas where access to banking services is low. This makes Safaricom's product a potentially huge offering.

"M-Pesa is a valuable case study of digital money in action," says Mr Paul Makin of Consult Hyperion, the British IT consultancy that has been working on the product for Vodafone Plc.

"It involves replacing cash with electronic money, it is for the mass market, it radically reduces transaction costs (for the least well off), provides new functionality including remote payments and, most of all, it provides an infrastructure that delivers capability and efficiency to the microfinance world, allowing them to stimulate new growth, new business and new opportunities."

M-Pesa uses a secure SIM toolkit application on mobile phones to transfer money between pre-paid electronic money accounts.

People load these accounts through the same top-up network that they use to load their mobile pre-paid value.

Using a simple menu on the phone (in English or Swahili), customers can transfer money to anyone else in the system, including "human ATMs" who will, for a small fee, provide old-fashioned metal and paper.