Mobile technology, the gateway for financial inclusion?

In developing countries as Haiti or Senegal, in rural areas in El Salvador or India, powerful women and men try to cope in a constant fight against destiny, nature, casts or politics. In spite of these challenges, their ability to manage scarce resources is outstanding. In order to help such efforts, small scale lending for the poor has been used from Jonathan Swift in Ireland 200 years ago to Grammen Bank and BRAC in the 70’s in Bangladesh.  Even though the improvements are notorious, the challenges are becoming more complex.

In 1990, Dr. Parker Shipton gave an important spin to the debate about how to tackle rural poverty by emphasizing in the role of savings. His paper How Gambians Save gave us an interesting inside about how rural Gambians save and the notion of credit as debt. Also, encourage the international community to focus on fostering savings rather than imposing the burden of debt on people. His anthropological insight underscores the importance of understanding cultural dynamics when implementing microfinances interventions.

Many of his findings can be extrapolated to different contexts where poor rural people save in different types of livestock (depending on liquidity), stick money under the mattress or burry it. Unfortunately, poor people’s assets are at mercy of robberies, neighbors with debts and relatives with pressing needs, as well as natural disasters. Sometimes, due to context conditions and conflict zones, these assets become liabilities.

Providing access to financial services constitutes a priority for reducing vulnerabilities for poor people. If microfinance institutions (MFI’s) could provide tailor made financial services to poor rural households, their capacity to manage risks and vulnerabilities would allow them to keep their assets as assets and cumulate needed lump sums. Unfortunately, many MFI’s are unable to provide flexible instruments without charging high interest rates, due to high costs of operation. However, technology is changing this situation.

The microfinance industry is evolving rapidly using technology to offer a gamut of product and services. For example, organizations such as Kiva and Microplace are mobilizing resources for social businesses. The use of mobile technology is gaining momentum. The Mobile Internet Content Coalition estimates that in 2010 there were 5.3 billion mobile subscriptions, 73% in the developing world.

Based on current levels of mobile phone penetration, could the use of mobile technology close the gap of financial exclusion? The use of technology as the gateway for allowing poor people is getting momentum. Money transfers, remittances and payments are just the tip of the iceberg. Is e-money the answer?.

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