Foreign Policy Magazine: Cell Phones Help the Poor

The spontaneous and unplanned explosion of Mobile-Banking (m-banking) in the developing world has gone well beyond expectations. And the effects for development could be monumental. M-banking began with the widespread use of prepaid cell-phone airtime as an informal currency. Migrant laborers across the developing world would text the serial numbers on prepaid airtime cards to loved ones elsewhere in the country; the recipients of the text messages would then sell the serial numbers to local mobile airtime vendors in exchange for cash, minus a small commission. By remotely selling their airtime this way, laborers were able to avoid taking long bus rides home to the countryside to hand over cash in person.

M-bankers worldwide already use their mobile accounts as de facto savings accounts simply by keeping cash credit: A 2008 survey found that 75 percent of M-Pesa users were already using their mobile accounts to store money. Respondents found the service over five times safer as a vehicle for savings than traditional methods like keeping the money at home. In fact, more than 95 percent found the service not only safer but faster, more convenient, easier to use, and cheaper.

By 2012, mobile banking operators could see nearly $8 billion in revenue just by expanding their services to the currently unbanked, according to an estimate by the Consultative Group to Assist the Poor (CGAP). In the developed world, m-banking is gaining traction in Australia, Britain, Korea, and Singapore, as well as in the United States. But only in the developing world does m-banking have such extraordinary ancillary potential. M-banking is the best opportunity yet to deliver financial services to the 1 billion people in the world who don’t have a bank account, but do have a cell phone.

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W. Husain Supplement: This story reminded me of a song by K’naan- 15 Minutes Away


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