Demonetisation and the subsequent push for the cashless economy have triggered a debate that was long overdue in the country. Leaving aside the political colours of the arguments, even those by some renowned economists, what is heartening is the fact that India is debating the impact of demonetisation and mobile-based transactions on the poor.
The opposition wonders if the poor can take to mobile phones to deal with their money. And even if they can, how much time would they take for it? Meanwhile, the government is optimistic that everyone will make efforts to adopt digital tools that can bring “banks to one’s pocket”.
The two major opposing claims in the ongoing debate are: a) Demonetisation will break the backbone of cash-dependent poor people of India. b) Demonetisation will uplift the poor by improving financial inclusion and making all economic activities transparent with digital, mobile-based cashless transactions.
Now, a research conducted in Kenya proves that mobile banking can actually help Indians beat poverty and that too in a record time. The research article published in journal ‘Science’ shows how mobile money, a service that allows people to make monetary transactions with mobile phones, helped lakhs of people beat poverty in Kenya within 10 years.
Kenya had introduced M-PESA (a mobile money service) in March 2007. In 10 years, the service has become “ubiquitous” in the country, used by at least one person in 96% of Kenyan households. There are around 110,000 M-PESA agents and only 2700 ATMs in Kenya, according to the article.
The research conducted by Tavneet Suri and William Jack in five rounds (between 2008-2014) found that access to M-PESA increased per capita consumption levels in the country. It lifted around 194,000 households, or two per cent of Kenyan households, out of poverty.
The researchers found that positive impact of access to mobile money was more telling in households led by women. The researchers say that mobile money “increased the efficiency of the allocation of consumption over time” and allowed “a more efficient allocation of labour, resulting in “meaningful reduction of poverty in Kenya.”
India can also benefit from mobile-based banking payments being pushed by the government if people emulate the Kenyan example in true spirit.
According to a Reuters report, mobile phone customer base in India rose to 1.05 billion in September, while the total population of the country is believed to be around 1.3 billion.
According to Census 2011, 88% of households in India have a mobile phone. This number must have increased in the last 3-4 years. The country’s internet-using population is expected to reach 60 crore by 2020, according to an ASSOCHAM-Deloitte study.
Following demonetisation, a number of people in urban areas, including small vendors, have adopted mobile wallets.
Besides, the government is facilitating mobile payments with several services like USSD, which can be used for payments up to Rs 5000 per day per customer with any phone on a GSM network. UPI allows cashless transactions with any mobile phone having an internet connection.
Demonetisation, hence, can be used as an opportunity. This is the high time for raising awareness, not petty politics.