INSIDE HIS dusty electronics repair shop in west Delhi, Sonu Kumar aims a screwdriver at the innards of what looks like an unsalvageable transistor radio. Yet after a couple of turns, a Hindi dance tune pours forth. The customer hands Kumar two crumpled 100-rupee notes (worth about $4.39), which vanish into a shirt pocket. Until recently, those banknotes, like all of Kumar's earnings, would have stayed in his pocket. Like many Indians, the 21-year-old repairman had never had a bank account. Making the trip to a bank branch, waiting in line when he could be out earning income, dealing with deposit minimums and other fees—banking in the conventional sense has always been out of reach for India's poor.
But a quiet revolution in financial services is now underway, thanks in large part to an unlikely hero: cell phones. Across the street from Kumar's shop is a cluttered drugstore, Sharma Medicos, where owner Lakhan Lal Sharma sells vitamins, shampoo, prepaid minutes for cell phones, and, as of last fall, mobile bank accounts managed by a startup called Eko. Kumar walks over to Sharma's, places 1,000 rupees on the counter, and pulls out his phone. The store owner punches in a code, then Kumar's phone number—which doubles as his bank account number—followed by a dollar amount and another code. A few seconds later, Kumar receives a text message from Eko confirming that his savings account with the State Bank of India has been credited 1,000 rupees. Sharma's agent account has been debited the same amount.
Economists say giving poor people access to basic financial services would go a long way (PDF) toward reducing poverty in the developing world. Without a bank account, everyone you know—a perpetually drunk cousin, a hungry neighbor, your belligerent spouse—can steal your hard-earned money. Without a bank account, you may have to spend days riding buses and walking to deliver cash to a relative, or endure steep fees to wire money home. And although microfinance loans are helping millions of people, receiving or making payments on those loans is complicated when you have to do it in cash.
The problem is that there will never be many bank branches where poor people live, because there is no profit motive for banks to set up shop in slums. But cell phones are everywhere. There are now more than 4 billion mobile subscriptions worldwide, with 80 percent of new connections made by consumers in developing countries. In India, for example, 10 million new accounts open every month. "More than a billion people worldwide lack bank accounts, but do have mobile phones," says Mark Pickens, an analyst with the Consultative Group to Assist the Poor, a development group at the World Bank. "That's a dramatic opportunity for people who have no better option than to save cash under the mattress or ride hours on a bus to send money to loved ones."
Read more at motherjones.com
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