Saturday, September 26, 2009
Telecoms: The Power of Mobile Money
This article describes the effect that a new technology and innovation is having in developing countries. A new company called M-PESA has made it easier, faster, and safer to move funds in Kenya by allowing the mobility of funds via text messaging. As strange and unreliable as it sounds, it has proved the best solution for saving for poor, rural, and isolated populations in Kenya. This has provided a reliable way to save, as opposed to other alternatives (storing wealth as gold, cattle, or currency) in addition to a time-saving mechanism as a person in a rural community does not have to spend all day going into the city to a bank. This small innovation could have serious implications for growth with an increase in saving, and has caused a huge change in institutions. This idea is spreading to other developing nations and could be one of the serious improvements in institutions needed to get developing nations on track to positive growth.
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This is a fascinating article. As we saw in the cases of Japan other East Asian economies, a high rate of savings was one of the keys to their high growth rates. The increased ability to save offered by postal banks were important in East Asia, and since mobile money makes it even easier, it could have an event larger impact on savings and growth. In spite of lacking infastructure such as roads, this technology may allow developing nations to help themselves out of poverty.
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