Mobile phones and financial inclusion in the developing world

oatsandsugar —  October 6, 2011 — Leave a comment

An article I wrote up for THINK micro about phone banking, financial inclusion and micro-finance.

On the Gates Foundation‘s site, there is a very interesting piece about phone banking and Africa, specifically about the “Global Savings Forum”.

Technology can be a major force to advance financial inclusion, which can help improve the lives of the poor in the developing world.

In Africa, and elsewhere in the developing world, it was commonplace for an informal banking network to form, particularly through communal trust.  A person would drop his money off at a service station, the guy at the station would call his friend in another village, and your friend/creditor/family could pick the money up from him.

Children and young mothers by their home in the Muthur camp

In even the poorest village in the developing world there is access to mobile phones. Where even 1 shopkeep in a village has a phone, there is an opportunity for access to financial services.

Regional Telcos and Banks in the developing world worked off this principle, allowing deposits to be placed at many town shops, basically turning them into bank branches.  Further, they allowed transfer of money, checking of balances and even the application for short-term credit to be done via SMS.  This greatly reduces transaction costs and could be an amazing way of striving towards financial inclusion in the developing world.  Merging this service with micro-finance could lead to unprecedented reach.

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oatsandsugar

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LLM candidate at Cornell Tech. Consultant for King & Wood Mallesons and Project Evangelist for Legalese.

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