Cash is so 20th century.
I’ve been experimenting with a 21st-century alternative, using money on a cellphone account to buy goods in shops. It’s a bit like using a credit card, but the system can also enable you to use your cellphone account to transfer money to individuals or companies domestically or internationally. And it’s more secure because a thief would have to steal not only your phone but also your PIN to get access to your money.
What’s really astonishing, though, is the site of my experimentation with “mobile money.” Not in the banking capitals of New York City or London, but in this remote Haitian town of St.-Marc.
Mercy Corps, through a United States government-financed program, is providing food for people here in St.-Marc who have taken in earthquake survivors. The standard method would be to hand out bags of rice, or vouchers. Instead, Mercy Corps will be pushing a button once a month, and $40 will automatically go into each person’s cellphone savings account — redeemable at local merchants for rice, corn flour, beans or cooking oil.
I took one of these phones and walked into a humble little grocery shop with no electricity — “Rosie Boutique,” named for the owner’s little daughter — and became the first person to make a cellphone purchase there. I typed the codes into my phone, and then both my phone and the store’s phone received instantaneous text messages saying that the transfer was complete. The food was now mine.
“It doesn’t get any cooler than this,” said Kokoévi Sossouvi, the Mercy Corps program manager. She’s right — and the technology isn’t just cool, but could be a breakthrough in chipping away at global poverty.
You see, the world’s poor face a problem even bigger than being fleeced by bankers. It’s being ignored by bankers.
Most poor people around the world don’t have access to banks. In particular, one of the biggest challenges for the poor is how to save money. The poor often have money coming in just a few times a year — after a harvest, or after a temporary job of picking coffee beans — but each time they have no way to save it.
Banks typically won’t accept tiny deposits. In West Africa, private money dealers accept deposits, but they charge 40 percent annual interest rates on them. So money is more likely to be kept under a mattress, and stolen or squandered.
The poor do establish their own savings accounts in the form of chickens, goats or jewelry that they can buy and later sell. “But what if your goat gets sick and dies?” notes Ms. Sossouvi.
That’s why the most powerful idea in microfinance isn’t microloans, but microsavings — helping the poor safely store their money. And mobile phones offer a low-cost way to make microsavings feasible and extend financial services to the poor. About three-fourths of Haitians have access to a mobile phone, and similar numbers are found in many poor parts of the world.
Kenya has been a leader in mobile money, but many other developing countries in Africa, Asia and the Americas are now jumping on board as well. For the poor, mobile telephones could have as profound an impact on finance — on banking the unbanked — as they have on communications.
One terrific poverty-fighting organization in Haiti, Fonkoze, is also expanding into financial services through mobile phones. It is implementing a system whereby Haitians in America will be able to use cellphones to send unlimited remittances to the phones of relatives back in Haiti. On the Haitian side, the recipient of the money would be able to go into any Fonkoze branch and cash out — or, better yet, use the remittance as the start of a savings account.
Nothing goes as planned in the developing world, and that’s true of mobile banking. Many people in the program here in St.-Marc are illiterate and have trouble mastering the codes, and the first time I tried a transaction I lost a cell signal. Central banks and regulators are sometimes wary of telephone companies engaging in finance.
But Robin Padberg, the chief executive of the Voilà cellphone company that Mercy Corps is working with, says that early in the new year the mobile money system will be expanded so that anyone will be able to make purchases, put money into a mobile phone account or take cash out. That’ll be a milestone in the inclusion of the poor in the world of financial services.
And some day, I’m pretty sure, I’ll engage in as sophisticated a financial transaction as Haitians — say, walking into a deli and buying a pastrami on rye with my BlackBerry — without even leaving Manhattan.