Tuesday, October 6, 2009

Impact of Cell Phones in the Region

The NYT has an interesting article on how cell phone technology is being utilized in neighboring Uganda.

Microfinance organizations in Africa are starting to experiment with using text message-based payment systems to allow clients to make interest and principal payments remotely.  A recent Economist had a Special Report on telecoms impact in emerging markets.

The third trend is the development of new phone-based services, beyond voice calls and basic text messages, which are now becoming feasible because mobile phones are relatively widely available. In rich countries most such services have revolved around trivial things like music downloads and mobile gaming. In poor countries data services such as mobile-phone-based agricultural advice, health care and money transfer could provide enormous economic and developmental benefits. Beyond that, mobile networks and low-cost computing devices are poised to offer the benefits of full internet access to people in the developing world in the coming years.

Suppose you want to send money from the city back to your family in the country. You could travel to the village and deliver the cash in person, but that takes time and money. Or you could ask an intermediary, such as a bus driver, to deliver the money, but that can be risky. More simply, you could buy a top-up voucher for the amount you want to transfer (say, $10) and then call the village-phone operator or shopkeeper in your family’s village and read out the code on the voucher. The credit will be applied to the phone of the shopkeeper, who will hand cash to your family, minus a commission of 10-20%. In some countries, where airtime can be transferred directly from one phone to another by text message, the process is even simpler: load credit onto your phone, then send it to someone on the spot who in return gives cash to your intended recipient.
These methods became so widespread that some companies decided to set up mobile-payment systems that allow real money, rather than just airtime, to be transferred from one user to another by phone. Once you have signed up, you pay money into the system by handing cash to an agent (usually a mobile operator’s airtime vendor), who credits the money to your mobile-money account. You can withdraw money by visiting another agent, who checks that you have sufficient funds before debiting your account and handing over the cash. You can also send money to other people, who will be sent a text message containing a special code that can be taken to an agent to withdraw cash. This allows cash to be sent from one place to another quickly and easily.
Some mobile-money schemes also allow international remittances; others issue participants with debit cards linked to their mobile-money accounts. Since there are many more mobile phones and sellers of mobile airtime than there are cash machines and bank branches, mobile money is well placed to bring financial services within reach of billions of “unbanked” people across the developing world.


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