How mobile banking can help the poor

Foreign Policy magazine’s editors have a blog called Passport where this interesting article shows up, here’s a snippet,

But mobile banking, or m-banking
for short, is about more than just added convenience; it’s about giving
millions of poor people in developing countries access to financial
services for the first time. And that could change the world.

The
World Bank estimates that in many countries, over half the
population—"the unbanked"—has never had a bank account. The poor tend
to be terrified of banks, since they’re often humiliated or ignored
when they try to enter them. That means they can’t leave their savings
anywhere safe, pay a bill without walking the cash to the office, or
prove that they’re credit-worthy. Meanwhile, mobile phone penetration
is through the roof, especially in Africa. In 2000, fewer than 8
million Africans had a mobile phone – now over 100 million do. That’s
one in nine. Now, anyone with access to a cell phone has a place to
keep his or her savings without needing a traditional bank account. We
won’t see millionaires suddenly emerging from the shantytowns just
because they’re "banked," but even a small nest egg needs a safe
resting place.

[…]

Remittances is where m-banking will really be world-changing. In Latin America, for instance, fewer than 10 percent
of remittance recipients have bank accounts. That means they’re hiking
to Western Union to pick up their money, which cost somebody a 15
percent commission to send. In the Philippines, SMART’s customers are
already sending an estimated $50 million in remittances each month via
their mobile phones, and that’s only the tip of the iceberg. In most of
the world, remittances account for more financial flows than foreign
direct investment or foreign aid combined. Lowering transaction costs
even one percent would mean over one billion extra dollars would
directly reach the poor each year, and that’s not chump change.

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