Wednesday, February 18, 2009

Banking services via cell phone to the bottom billion

The use of cell phones is even spreading rapidly in Africa. Not only do Africans make phone calls but they also send money to relatives and employees. City workers can wire money to their relatives in small country villages. Likewise, small business people can easily send money to their employees.

The story that we found in The News Tribune focuses a lot on the businesses providing the service, who can do the money transfers for smaller fees than banks can. Writer Shashank Bengali gives us an example of the cell phones use.

Before, when Malit Kuronoi needed to pay the cowherd who watched over his cattle in faraway northern Kenya, he made the 500-mile round trip himself. For four days, Kuronoi rode ramshackle buses across roads patrolled by bandits and bribe-seeking cops, sometimes sleeping by the roadside when a bus broke down, just to deliver the money.

Now he sends it by cell phone.

The Kenyan farmer is among millions who are at the forefront of a pocket-sized financial revolution that's sweeping Africa. Mobile banking, powered by cell phones, is allowing people who could never afford traditional bank accounts to send, receive and save money, often just by writing text messages.

Cheap and efficient m-banking services are cropping up from South Africa to Senegal. They're the latest example of how the cell phone has transformed life in sub-Saharan Africa, where over the past decade mass-market mobile networks have stitched together countries and families long separated by distance, poverty and shoddy infrastructure.

Less than one-fifth of Africans have bank accounts, and far fewer access the Internet. The continent, however, recently surpassed the United States and Canada with 340 million cell phone users and is adding another 70 million each year, according to Wireless Intelligence, a market research group.

Cell phone companies are racing to capitalize by offering banking tools that make it easier for city dwellers to send money to rural relatives, small businesses to pay their employees and parents to deposit their children's school fees. The amounts are relatively small, and the commissions are a fraction of those that major banks and wire services such as Western Union charge.

"It's absolutely changed lives," said Aly Khan Satchu, a Kenyan financial analyst. "This is bringing banking services to the 'un-banked' and the poor. It's very empowering."

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