Unbanked? I did not know such a term existed, until I began to dig deep into mobile payments. Although I was aware that many people (actually millions of people) did not have a bank account simply because they were poor or marginalized, I didn’t know that the term ‘unbanked’ was representative of such people. Further, banks did not consider the poor to be profitable customers as the cost to deliver service to these customers far outweighed their (the poor) ability to save, hence generate suitable depository revenues for the banks.
As a consequence, the lack of ‘safe’ credit forced people in the lower economic strata to take out loans from usurious lenders who charged astronomical interest rates. As a result, many people remained indebted for most of their lives, further pushing them into poverty. Microfinancing came into being to essentially address this lack of credit, by creating mechanisms policed by society, to enable people to save and borrow in a communal manner. Microfinancing has become very popular and has been a game changer at the bottom of the pyramid. In 2006, the father of Microfinance, Mr. Muhammad Yunus of Bangladesh (Grameen Bank fame) was awarded the Nobel peace prize in recognition of his yeoman efforts to perpetuate this socio-economic program.
I know that a simple paragraph cannot by any measure describe the impact that microfinance has had on society, but my intent is to lay some ground work and highlight the fact that millions of people around the world don’t have access to banks and financial services around the world – they are the ‘unbanked’. And to serve their needs, shadow financing systems have emerged over the many years and these systems often work to the detriment of the people served.
That said, of late the unbanked have been greatly benefited by a technology that has become very ubiquitous – mobile technology. If I think about the progressive social impact of the mobile phones, I can break it down into three key elements.
- Communication – Mobile phones gave millions of people easy access to communication. No secret there! The constantly falling cost curve made handsets affordable to the poorest. India now has more than 880 million subscribers (>70% penetration rate) while in Africa, more than 500 million handsets were sold in 2011.
- Information – As more people communicated, they had more access to information. The internet surely democratized information, but only to those who had access to the same. Many parts of the world had no (and still don’t have) access to the internet.
- Application – As people communicated and shared information, a mobile platform began to emerge that allowed these two elements to be shaped into applications that could be harnessed by many at the touch of a button.
I know I am oversimplifying – but you get the point – right?
In the case of the unbanked, the confluence of these three elements can best be seen in Kenya with M-Pesa. M-Pesa was first conceived by Vodafone and deployed by its subsidiary Safaricom in 2007. But what the heck is M-Pesa? M-Pesa is a mobile platform that provides or rather enables automated financial services to the subscribers of Safaricom. “M” in M-Pesa stands for “Mobile” and “Pesa” in Swahili stand for “Money”.
So, M-Pesa -> Mobile Money.
And, my fascination for mobile money/payment continues. What really gets me is the enormous impact that this has had in the lives of millions of people. We have seldom seen a technology in recent times that has had this far reaching impact.
In my next post, I’ll go into some detail about M-Pesa and it’s impact and how other MNO’s in various countries are trying to emulate the success acheived in Kenya.