The Article
This article discusses a horrible cycle seen in some developing countries. Farmers borrow money to cover planting costs, but their product is a low-return crop, so to repay the bank they borrow from local moneylenders, with no way to pay back the moneylenders. This is a common story. The usurious loan terms keep farmers and agricultural workers in debt. They borrow "to cover planting costs, buy equipment or purchase land, and repay after the harvest". Slowly opportunity is improving. with the development of microfinancing. However, there are still laws that prevent the ability for microfinancers to work with citizens. But, there is hope- cell phones. The World Bank is piloting a program that uses mobile-network data and crop-suitability mapping to arrange season loans using mobile money. One of the problems with using the local bank is high interest rates this is from a lack of competition. So, mobile money from the World Bank and microfinancing may create more competition forcing local banks to use more competitive interest rates.
3 comments:
It is interesting to see how institutions are responding to the increase in new technology. Mobile money is an interesting and important subject as increasingly banking is done via smartphones instead of at a normal bank. It is sad to see that laws are making it hard for consumers to get micro loans as these loans are important in starting businesses in poor areas. It is my hope that laws can be changed and farmers can get some relief in borrowing but will be interesting to see where mobile money will go in the future.
It seems that mobile money is a good way for farmers to get loans with less limitations from that local law. And it also brings competition into the loan market that farmers can benefit from the competition with lower interest rate. However, I think one essential issue that should be addressed is to increase the return of the low-return crops. As far as I know, in China, farmers cannot get higher revenue because the market is not complete. Crops can only be sold in markets but farmers usually do not have a site in the market. They can only sell they crops to retailers with extremely low price. I think one most important thing to help farmers is to help them get higher return no matter changing crops or solve market failures.
It is exciting to see that world bank is trying to work around the existing local barriers using mobile technology. It would without a doubt change the way money is lended in Burma if it is successfully implemented. However, I don't think it is attainable with the existing structure and technology in my country. For the time being, the country possesses neither credit banking system nor online banking to deliver the money directly to farmers. Nevertheless, if the world bank works together with Myanmar's establised banks that have many branches throughout the country, mobile money lending can be realized.
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