Bringing Financial Services to the Developing World via Mobile Technology

Author:
Samantha Hackney
Theme:
Global Philanthropy
Mobile banking
Thursday, July 31, 2014

The digital revolution has created an exciting opportunity for philanthropists interested in expanding financial services for the poor and addressing issues like hunger. 

Today more than 2.5 billion people, about half of all adults in the world, do not have access to a bank account. While this number may not seem as important as the 870 million people suffering from chronic undernourishment, financial services are a key aspect of development and can help millions of individuals provide food for their families. It is precisely this reason that many philanthropists are eager to get involved with organizations working in the area of financial inclusion.

Enter the mobile device. At the end of 2013, there were approximately 6.8 billion cell phone subscriptions, which is a threefold increase from 2003.[1] Even more surprising, 5.2 billion of these subscriptions were in the developing world. [2] But how can mobile technology increase development impact?

  1. Digital services can reduce the costs associated with money transfers, which allows a household to send or receive money when needed.
  2. Mobile technology can be used as a platform for micro-savings. Ideally the mobile platform can connect to a bank account, where individuals can deposit savings through the platform in a more secure way.
  3. Banks and providers can use financial histories to develop products and services that are customized to the needs, cash-flow and risk profiles of the low-income consumer.
  4. Technology and mobile money reduces the transaction costs related to transportation or the cost of servicing a small loan for banks, which could potentially lower the interest rate.

New mobile technologies have been a transformative tool for farmers and small vendors allowing them to accurately price their food and goods before traveling long distances.

There are a number of philanthropic organizations working actively in this space. Some of the larger foundations are working to digitally connect the poor to one another by modeling and expanding the success of M-Pesa in Kenya, a mobile money transfer service through Kenya’s largest mobile network operator Safaricom. Others are working with governments on regulations to increase access, such as the Bill and Melinda Gates Foundation. Still others, such as the MasterCard Foundation, are investing in research to better understand how to best design and deliver financial services to the poor.

Despite the exciting promise presented by mobile technologies, microfinance remains a hotly debated topic within international development. Why? For one, it can be difficult to balance the desire to protect the poor with the push from investors looking for a financial return or sustainability. Microfinance has also come under fire in the past several years after a series of usurious business practice allegations by some institutions and extremely high interest rates.




[2] https://itunews.itu.int/En/3741-Mobile-subscriptions-near-the-78209billi...


Samantha Hackney is a summer intern for the Center for Global Philanthropy providing research and programmatic assistance to New England International Donors (NEID) and other clients with international philanthropic interests. Samantha is currently a second-year masters student at the Fletcher School of Law and Diplomacy at Tufts University concentrating in development economics and international business. Prior to Fletcher Samantha worked as an Account Development Manager at Forrester Research, serving as the liaison to Fortune 500 companies to help them minimize risk and increase their return on investment on future opportunities brought about by global and technological change. She graduated from Amherst College where she earned her Bachelor of Arts degree in French. Be sure to keep an eye out for Samantha's contributions to Deep Social Impact in a series of blog posts about international development. 

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