I had the distinct honour of playing some role in the decoupling of Safaricom from Telkom Kenya.
Safaricom had been formed in 1997 as a fully owned subsidiary of Telkom Kenya, which had itself been formed after the separation of the telecommunication and postal functions of the erstwhile Kenya Posts and Telecommunications Corporation, a large State monopoly that had existed since independence.
Vodafone Group PLC of the United Kingdom acquired a 40 per cent stake in Safaricom in May 2000 and took over the management responsibility for the company.
The Kibaki government, in which I served as Permanent Secretary, pursued further liberalisation of the sector to give the company an opportunity to fairly compete. Later, we oversaw the company's issuance of its initial public offering (IPO) at the Nairobi Securities Exchange (NSE).
Our greatest fear then centred on whether the fledgling organisation could survive in a highly competitive environment. Luckily, Safaricom was being led by Michael Joseph at that time, and he embraced Joseph Schumpeter's concept of creative destruction. The Austrian economist explained his idea in his 1942 book, Capitalism, Socialism, and Democracy in the following terms: The opening up of new markets, foreign or domestic, and the organisational development from the craft shop to such concerns as US Steel illustrate the same process of industrial mutation -- if I may use that biological term -- that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of creative destruction is the essential fact about capitalism (p. 83).
One afternoon in 2007, Michael walked into my office to explain a new idea which might require Central Bank's approval. He later sent two of his colleagues to demonstrate how this peer-to-peer money transfer would work.
A week later, he introduced it to the Board, explaining that it will be a customer retention product.
He had no pitch deck and had not quite developed the value proposition. He simply said the innovation would be used for customer retention. I was sold to the product.
I sought clarity from Central Bank and to their credit, the acting Governor then sent four officers to my office where the two Safaricom team, that I had met earlier, again came to demonstrate. The CBK officers became our allies in selling an idea that had never existed before. Like any good idea in Kenya, resistance started to creep in.
While I pursued the normal channels through the Treasury, Michael had launched a multipronged approach both political and social.
With the new Governor, Prof Njuguna Ndung'u at the helm, the support of President Mwai Kibaki, the nudging of Acting Finance minister John Michuki and his Permanent Secretary, Joseph Kinyua, M-Pesa was given the green light to start mobile money in Kenya becoming one of a kind in Africa.
I give this story of Safaricom's early innovative activity because the industry 4.0 technologies like Artificial Intelligence (AI), Blockchain, Internet of Things (IoT), Big Data and more others are here. Big Financial Technology Companies (BigFinTechs) are leveraging these emerging technologies to reshape the world of finance.
Like Schumpeter predicted, resilience of any organisation is maintained through innovation. Time is nigh to creatively destruct what we have and recreate everything a new.
For M-Pesa, policymakers and the regulators took a chance since there was no legal framework to protect the consumers.
Going forward, the risks will be even higher since technologies like AI and Big Data are basically a double-edged sword that can cut either way. Nevertheless, the government has already developed a road map for the implementation of these technologies in the country through creation of sandboxes -- a virtual space in which new innovations can be tested under the watch of regulators -- for user centred innovation.
As we celebrate 20 years of existence, Safaricom has created many innovative products that have had a huge impact on the people's lives. Products like M-Shwari enabled millions of people to be banked. Lipa na M-Pesa has transformed the payment of goods and services. Fuliza has facilitated access to instant loans for those in financial stress.
A joint survey by the Central Bank, Kenya National Bureau of Statistics (KNBS) and Financial Sector Deepening (FSD) in 2019 shows that Kenya's financial inclusion landscape has undergone a transformation since 2006.
Formal financial inclusion has risen to 82.9 per cent, up from 26.7 per cent in 2006, while complete exclusion has narrowed to 11.0 per cent from 41.3 per cent in 2006. This could not have happened without the many innovative and financially inclusive products developed by Safaricom.
The company promotes innovation in the wider society through its Spark Venture Fund that supports late-seed, early-growth stage companies with a presence in Kenya, while leveraging its assets to enable the companies to scale.
Some of these startups have begun to scale and are creating employment to young people.
These include Ajua (integrated customer experience), Lynk (connecting informal workers to jobs), Eneza (Education), Sendy (logistics), iProcure (agricultural supply chain platform) and Farmdrive (credit scoring for smallholder farmers).
Safaricom's innovativeness is not just confined to products and services. It has built and equipped M-Pesa Foundation Academy, a highly creative institution that admits students from a challenged background and provides them with first class education.
In spite of the background of the school's students, the first Kenya Certificate of Secondary Education cohort performed beyond the expectation of experts with more than 75 per cent gaining entry into universities across the country.
The school remains a national exemplar to be emulated by both public and private schools.
In building a resilient organisation, creativity has to be at the centre with the flexibility to change the status quo. This is what Schumpeter described as the ability to incessantly revolutionise the economic structure from within, constantly destroying the old one and continuously creating a new one.
However, it takes a lot courage to innovate and above all an enabling policy and regulatory environment.