February 20, 2009

Mobile Money for the Unbanked

According to a press release dated February 17, 2009, "The GSMA, which represents the interests of the worldwide mobile communications industry, and the Bill & Melinda Gates Foundation today announced an innovative program that will expand the availability of financial services to millions of people in the developing world through mobile phones. The Mobile Money for the Unbanked (MMU) program, supported by a $12.5 million grant from the foundation, will work with mobile operators, banks, microfinance institutions, government and development organizations to encourage the expansion of reliable, affordable mobile financial services to the unbanked."

The MMU program is part of the Gates Foundation's Financial Services for the Poor initiative, "which is working with a wide range of public and private partners to harness technology and innovation to bring quality, affordable savings accounts and other financial services to the doorsteps of the poor in the developing world."

I applaud the creation of the MMU program since gaining access to financial services is a significant problem for individuals and small and medium-sized enterprises (SMEs) in developing nations. Mobile devices will improve the access of mobile financial services for individuals through money transfer services, which will give consumers a sense of empowerment. SMEs will benefit by improving inventory control, paying vendors electronically rather than mailing or hand-delivering payments, which is not a productive use of time, and gaining improved access to financial services necessary to meet the needs of business growth.

The Gates Foundation's statement further says, "The MMU program will fund regulatory and market research to help overcome some of the barriers of providing these services and demonstrate the business case for serving this market. The program includes a $5 million fund to catalyse a new wave of mobile money innovation, encouraging mobile network operators to create new services for previously unbanked people in emerging markets. The MMU program will support approximately 20 projects in developing countries, focusing on Africa, Asia and Latin America, with the goal of reaching 20 million previously unbanked people with mobile financial services by 2012."

Market research will show that there are great business opportunities providing mobile financial services. Such services will eliminate many of the barriers that exist in conducting financial transactions in developing markets. In Bangladesh, for example, 80 percent of transactions involve hard currency.

In my post, "Developing Nations Seek Entrepreneurs," I quote Kazi Islam, Chief Executive Officer of Dhaka, Bangladesh-based Grameen Solutions Ltd., "Migrants moving to the capital city of Dhaka still send funds back to their home villages, often relying on the local post office or a trusted friend to carry the cash to their families. As a result, it becomes a barrier to trade since funds cannot be used while they are in slow, physical transit." The MMU program will help eliminate these barriers.

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