No, this post has nothing to do with Robert Mugabe, as the title might suggest, but you will see the connection momentarily. The New York Times Magazine has a lengthy article up on the potentially huge role cellphones can play in ending global poverty. I’ll confess that I haven’t read the whole article. However, what I have read has been thoroughly interesting, but give that I’ve written about some of these possibilities for ending povery before, I want to touch on the idea that cellphones offer a radically new–and almost completely private–system of banking. From the article:
During a 2006 field study in Uganda, Chipchase and his colleagues stumbled upon an innovative use of the shared village phone, a practice called sente. Ugandans are using prepaid airtime as a way of transferring money from place to place, something that’s especially important to those who do not use banks. Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission. “It’s a rather ingenious practice,” Chipchase says, “an example of grass-roots innovation, in which people create new uses for technology based on need.”
It’s also the precursor to a potentially widespread formalized system of mobile banking. Already companies like Wizzit, in South Africa, and GCash, in the Philippines, have started programs that allow customers to use their phones to store cash credits transferred from another phone or purchased through a post office, phone-kiosk operator or other licensed operator. With their phones, they can then make purchases and payments or withdraw cash as needed. Hammond of the World Resources Institute predicts that mobile banking will bring huge numbers of previously excluded people into the formal economy quickly, simply because the latent demand for such services is so great, especially among the rural poor. This bodes well for cellphone companies, he says, since owning a phone will suddenly have more value than sharing a village phone. “If you’re in Hanoi after midnight,” Hammond says, “the streets are absolutely clogged with motorbikes piled with produce. They give their produce to the guy who runs a vegetable stall, and they go home. How do they get paid? They get paid the next time they come to town, which could be a month or two later. You have to hope you can find the stall guy again and that he remembers what he sold. But what if you could get paid the next day on your mobile phone? Would you care what that mobile costs? I don’t think so.”
In February of last year, when Vodafone rolled out its M-Pesa mobile-banking program in Kenya, it aimed to add 200,000 new customers in the first year but got them within a month. One year later, M-Pesa has 1.6 million subscribers, and Vodafone is now set to open mobile-banking enterprises in a number of other countries, including Tanzania and India. “Look, microfinance is great; [Grameeen Bank founder Mohammed] Yunus deserves his sainthood,” Hammond says. “But after 30 years, there are only 90 million microfinance customers. I’m predicting that mobile-phone banking will add a billion banking customers to the system in five years. That’s how big it is.”
This could actually serve as a bulwark against inflation in the countries that have central banks gone wild (Now, I’m looking at you, Zimbabwe). I do expect the price of cellphone minutes to continue falling but not at anything like the value of money in a hyperinflation situation. Also, if you want to change the minutes back into cash, you once again run into the problem of inflation, but you might be able to change it into a different currency, or it may be unnecessary to change the minutes back into currency at all if they are traded widely enough. All in all, this is a wonderful development for people who live in underdeveloped and/or horribly governed countries.
Link from Hit and Run.
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