The Life of Dan: m-banking

Can mobile phones save the world?

Ten mobile phones per 100 people = +0.5% in growth in GDP per person.

Well, according to Leonard Waverman of the London Business School: "an extra ten mobile phones per 100 people in a typical developing country leads to an extra half a percentage point of growth in GDP per person." (The Economist: A bank in every pocket?)

That is huge.

GDP in sub-Saharan Africa should be around 6% in 2008 so adding 0.5% to that just with some cheap electronics isn't too bad at all!

But what is the magic of mobile phones?

Well, they enable a couple of big things:

They break down geographical barriers

In many developing countries, geography is a big factor in hindering trade and growth. Large distances and geographical barriers make infrastructure for transport and communications too expensive to build and maintain. Unreliable infrastructure means traders cannot get knowledge of the market, they waste time and money on trips that are not worth it, they cannot exchange information and knowledge, or form groups with significant trading power.

Mobile phones change all this.

Suddenly, you can get market knowledge, you can negotiate before making the trip, you can coordinate and exchange information without the need for a perilous and lengthy journey. You can trade. You can run a business.
They enable Banking

That's a great start. But there is something else just as fundamental to an economy that mobile phones enable: banking.
"Only 20% of families in Africa have a bank account. Ethiopia, Uganda and Tanzania have less than one bank branch per 100,000 people. Opening an account in Cameroon requires $700—more than many of its people earn in a year. In Swaziland, a woman needs the consent of her father, husband or brother to open an account or take a loan, and 75% of adults do not have a verifiable address.”
So, people cannot gain access to credit, they cannot gain interest on money they save, they cannot safely move their money from one place to another, they cannot transfer money to family members or for business transactions.

But mobile phones change all this.

Suddenly, your inexpensive mobile phone is also your life-line to the world of banking. You can use it to send money via text message, you can receive your wage via your phone, you can accept payments without carrying cash around, you can make a long journey without the risk of carrying cash with you.

All without ever visiting a bank branch or cash machine.

The real magic is that m-banking reduces transaction costs so much that it becomes profitable for banks and mobile providers to get together and start offering these services to even the poorest people while still making a profit.

You can even combine m-banking with micro-financing and suddenly people in hugely geographically dispersed areas can gain access to credit, build up a credit rating and start to build a sustainable future for themselves.

That's pretty amazing for a device that 3.7 billion people around the world carry in their pocket every day.

So yes, I think mobile phones certainly are playing a big part in saving the world.

Further reading:

There are some very exciting things going on in this space, with literally millions of people using services in Kenya (M-PESA), the Philipines (G-Cash and SMART Money) and South Africa (WIZZIT)

Last year, Western Union, present in more than 200 countries, started up a new mobile division, which in October announced an agreement with the GSM Association (representing 700-plus operators) to develop a commercial and technical framework for mobile-based global remittances.

And here are some of the best resources I found on m-banking: