The telephone may be today?s fastest evolving technology. Especially in developing countries, this 1876 invention?s mobile avatar has been changing the social landscape in unprecedented ways. It may be making a more rapid and substantive difference to how people live and work than any technology ever before. From the policy perspective, the question is how this technology can deliver goals better than conventional programmes.
RBI?s latest annual monetary policy announcement takes note of how mobile penetration levels in India suggest that mobiles could become an important medium for delivering financial inclusion. An inter-ministerial group set up to establish a framework for delivering financial services via mobiles prefaces its report by stating, ?The choice is not whether to embrace change or resist it. The choice is whether to drive change with a plan or be overtaken by it without one.?
The Indian success story on the penetration front is well-known. Here, mobile telephony has outstripped access to financial services even in rural areas where it was a latecomer. Still, there are lessons to be learnt from regions that don?t attract as much attention but have been pulling off experiments worth emulating. Consider the African story, which has been grabbing headlines because of the tenacity with which India?s top mobile operator has doggedly pursued acquisitions there. The most widely mimicked model is M-Pesa, which has over 9 million users in Kenya where it allows people to transfer money using mobiles even if they do not hold a bank account. Its hallmark is giving the poor access to financial services.
What does this suggest for India? Given that 51.4% of farm households are without access to credit, given that only 27% of farm households are indebted to formal sources, given that bank branches per person are abysmally few as compared to developed countries and costs per transaction mean that this is unlikely to change any time soon, if the substantially unbanked population can access financial services through mobiles (with facilitators like banking correspondents), then we would be seeing some meaningful pyramid-saddling (with due credit to Professor Prahalad).
What?s truly interesting is that mobile telephony has been registering success even at some of the world?s worst trouble spots. In Afghanistan, telecom provider Roshan is not just the largest private company, largest investor and largest taxpayer, it is also one of the largest indirect employers because of a vast and necessary network of agents who sell top-up vouchers. Since even the warlords want mobiles to work, they tend not to trouble the networks. As far as the intersection of mobile telephony and financial services is concerned, one must take note of Roshan?s M-Paisa innovation (following the M-Pesa model). It enables registered Roshan customers to use their mobiles to transfer money, repay microfinance loans etc in an easy, cheap and immediate fashion. Illiteracy is high in Afghanistan, so an interactive voice response system in Pashto, Daro and English has been devised to expedite financial services via SMSs and the like.
Over in Iraq, where Saddam Hussein banned mobiles, they have become a key commerce tool since his ouster. Where curfews are the norm rather than the exception, mobile money keeps ordinary business going. Across the Syrian border, the UN distributes food vouchers among Iraqi refugees via SMSs. Leakage is reduced, refugees no longer endure unending queues and local shopkeepers get to become upbeat about the additional business.
What a great difference could such schemes make in India, where government officials feel unable to carry out even Census exercises in hundred of villages with Naxalite presence? They would help in the safer and more immediate payment delivery of monies for programmes ranging from the National Rural Employment Guarantee Scheme to the Janani Suraksha Yojana. Transactions costs would be trimmed (as has happened in the cases of M-Pesa and M-Paisa). Seen against the backdrop of the triple whammy syndrome?wherein the vulnerability of poor populations increases in proportion to their lack of access to financial tools?such mobile interfaces can increase poor people?s access to legitimate credit as well as savings opportunities. This will obviously need cooperation between providers of mobile and banking services as well as regulators. But, again, global precedence is already in place. Inimitably Indian programmes like the Unique Identity Number will only help streamline such a process.
When US treasury secretary Timothy Geithner visited India recently, why did he stop by at a store offering mobile banking services? Forward-looking financial systems, globally, must prepare for the unbanked joining their ranks. Mobile banking will be an important part of this transition, with big numbers originating in the Asia-Pacific.
renuka.bisht@expressindia.com