Electronic Currency in Africa: M-PESA as Private Inside Money

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.