mobile banking

A quick note on an interesting article in this week's Time: Barbara Kiviat writes about the emergence in the field of microfinance for the need for a safe place to save and deposit money, which is something that we at the Global Assets Project have been talking about for a while.

While microcredit was at the root of the microfinance movement's beginnings, what's becoming clear is that those who take out small loans also desire a place to deposit and save their money.  Indonesia's Bank Rakyat, she notes, has ten savers for every one borrower, and their borrowers use the loans for household needs about 30% of the time.  And they save in the form of assets (such as livestock and jewelry), requiring them to pay a fee to pawn those assets in times of need.

 They may take their tea with milk and pronounce "tomato" wrong, but here's something on which we can agree with our friends across the pond.

Yesterday, the UK's International Development Secretary Douglas Alexander announced DFID's ₤1.4 million, three-year project: Facilitating Access to Financial Services through Technology (FAST).  Working with CGAP and GTZ, FAST's aim is to "lay the foundations for financial services to be made available through new and emerging technology across Africa and Asia."

As it stands now, 2 billion people in the developing world lack access to financial services, because of distance or affordability constraints.  With that in mind, FAST aims to explore the possibilities and extend the reach of "branchless banking" using new technologies and innovative methods.

Its three-pronged strategy is to:

Social policies around the world are shifting to account-based systems. Governments and corporations are using accounts to deliver a wider array of benefits. Between 1980 and 2004, the presence of defined contribution plans with public support increased from 10 to over 50 countries. But account strategies are also growing for the purposes of education, home ownership, health, and benefits directed at children.

Many of these account-based systems, however, are provided by employers and/or assume that persons have relationships with financial institutions, leaving out millions of low- and no-income people. This pattern is repeated in nearly every country. 

Take, for example, the obviously frustrated account of Cape Town, South Africa resident who is desperately seeking to do right by her injured employee by helping him receive his unemployment benefits payments (from today's Cape Times, via Charles Klingman's awesome "unbanked listserv"):

When I walked around yesterday's CGI exchange, getting a convention-style glimpse into the organizations and corporations making commitments to poverty alleviation this year, I was particularly excited to see not only institutions focused on financial services for the poor, but particular, savings and asset-building. Yes, the actual word - asset-building - at the CGI. Considered by some as an inaccessible term to describe wealth creation opportunities for the poor, I am thrilled to see it permeate the global microfinance field (as I assumed it would). Oweesta, the CDFI running IDA and other asset intervention work in native American communities in the USA, seems the only organization focused on empowerment of native communities, and if carrying the AB message in all of their materials. And Oxfam, who have been running a Gates-funded Savings for Change program (informal rotating savings groups mobilizing deposits for those still completely untouched by formal microfinance) for a few years around the world, have added the term asset building to the September version of the program's one pager.

I consider my cell phone an asset. With all those hi-tech capabilities packed into a little handset, it keeps me simultaneously connected, productive, on-time, en route, entertained and informed. And I'm not alone - more than 3 billion people around the world (almost half of the global population) have a cell phone. But what if this gadget that seems capable of reaching almost anybody and doing almost anything could also provide a mechanism for savings and asset building for individuals around the world? Despite seemingly limitless potential and enthusiasm for such an innovation, it will unfortunately be some time before this is a reality.