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Can Cell Phones Save the World?

It can send texts and it can make calls, but can it save the world?

It might seem far stretched, but considering that poverty is often instigated by isolation and the accompanying lack of access to markets, emergency health services, education and governmental representation, it makes sense that economists are starting to pinpoint cell phones as a potential “weapon against global poverty.”

Renowned economist Jeffrey Sachs claims that “the cell phone is the single most transformative technology for development,” positing that providing developing countries with cell phones and widespread mobile network coverage can be instrumental in lifting regions out of poverty.

In the last 8 years, the United Nations Millenium Villages Project has aimed to improve 14 rural villages across 10 African countries by providing the framework for mobile connections. They have found that countries’ GDPs increased in a way that mirrors the nearly 400% increase in cell phone use in Africa over the last 5 years.

Kenya may be the poster child for the mobile movement with its tremendous GDP growth and innovative M-Pesa or “mobile-money” concept that has the country on an economic upswing. Researchers found that “70” was the magic number: 70% of the Kenyan population owned a cell phone while 70% of the population also reported no access to a bank. Hence, the concept of mobile-money was born.

Beginning in 2007 as a way to send people microloans, M-Pesa’s mobile-money became the main way to send money instantly from urban to rural areas. Mobile-money allows people to digitally transfer cash and utilize other banking services via mobile phones, thus facilitating trade and boosting business in a way that is vital for the country to thrive.

This mobile-money concept is great for Kenya’s large informal economy sector by releasing the flow of money that is often stagnant in developing countries with unstable infrastructures.

What’s more, cell phones are now the least expensive they have ever been, thanks to Safaricom, a Kenyan telecom provider that set up business models for selling services to the poor and thus made cell phone use more affordable. Thanks to the low cost of setting up mobile towers and the decreasing cost of cell phones, Kenya now may have more widespread cell phone coverage than many regions of Europe.

Some may argue that the best part about the cell phone solution is that businesses, rather than the government, drive the movement’s momentum. Having businesses like Safaricom at the center of the progress curbs the chance of corruption and unequal access that usually accompanies governmental initiatives, particularly in developing countries.

Other countries around the world are starting to take interest in the transformative power of the cell phone. From its success in Kenya, Safaricom is now bringing its mobile banking model to areas like Bangladesh, Uganda, and Gambia with the hope of expanding more in the future.

– Alexandra Bruschi
Source: CNN, Quartz
Photo: CNN

Mobile Banking With M-Pesa
Here in the U.S., cell phone apps such as ‘Venmo’ that allow simple and quick money transfers have revolutionized the way we exchange money. However, with mobile banking as well as Venmo-like apps, they require all users to actually have a bank account. While speed and efficiency are a huge pro about these apps, they, as they are, wouldn’t necessarily be as successful a venture in the developing world.

M-Pesa (meaning mobile ‘money’ in Swahili) has grown to be the most successful mobile financial service in the developing world. Started in 2007, the company’s main goal wasn’t necessarily convenience but had the more objective of creating an app that people without bank accounts can use. Bank accounts usually must maintain a minimum balance or have other requirements many people living in developing areas just cannot meet.

M-Pesa users only need two out of three things: a mobile phone and an ID card or passport. With these in hand, they can do numerous things just from their phone: deposit and withdraw money, transfer between different accounts (even to those without an M-Pesa account), manage their transactions, pay their bills, and even purchase mobile minutes. With about 1 in 5 sub-Saharan Africans actually having a bank account, M-Pesa opens up an entire world for people to exchange money freely without being tied down to a bank.

The company manages an individual’s account through their phone number. As part of Safaricom’s and vodacom’s networks (service operators in Kenya and Tanzania: think Verizon or AT&T), only those who receive their service through these companies can take advantage of the system. Once money is transferred, users can cash out at various retail outlets or stores that normally sell cellphone minutes.

M-Pesa was initially created to help the transfer of funds for people receiving microfinanced loans because it helped keep rates down, as it cut out the direct contact with money. Now, it operates in 5 countries including Afghanistan, South Africa, Kenya, Tanzania, and India. It reaches 15 million users in Kenya alone. 

– Deena Dulgerian

Sources: Co.Exist, Wikipedia
Photo: Hapa Kenya