Cellphone Banking Helping To Fight Poverty In India

An anonymous reader writes "Technology Review is running an in-depth story about the way cellphone banking is transforming the lives of many poor people in India. By enabling users to manage a legitimate bank account and finance micro-loans, cellphones are a major force of social and economic change. It's perhaps not surprising, given that despite widespread poverty, India has the world's fastest-growing cellphone market and the second largest number of cellphone users (after China). The article mentions one Indian start-up, mChek, that is thriving as a result. There's also an excellent video report."

Super security

[hansraj (458504)]

This mcheck service is super secure. From their FAQ [mchek.com]:

Who else will get my Credit Card information?

mChek will NEVER disclose your Credit Card information to anybody, including to you.

(Emphasis mine)

Re:Super security

[Lonedar (897073)]

Well, that kinda makes sense. There shouldn't be a way of obtaining the card information short of reading it off the actual credit card.

Re:

[MrNaz (730548)]

Of course it makes sense. You get your card. The number is on it. Bank staff shouldn't be able to even access it, unless you give it to them.

Re:

[argiedot (1035754)]

Oh, it's a startup, I never realised. Anyway, I think they're pretty damn awesome. I've never before had the experience where I purchase something on my phone, get an SMS and I get to go to the damn concert if I show the people at the door the SMS and the card. Don't know if these are standard elsewhere, but I still think it's freaking awesome.

Re:

[flyingsquid (813711)]

You know, perhaps to stimulate this form of banking, we could allow people to buy up the various loans, then bundle them into securities, and sell the securities off on the market. Think of the tremendous impact we could have on the economy of the developing world.

Poverty

[TubeSteak (669689)]

Cell phones are like computers and the internet rolled into one for those poor people in India.

I bet in the next ten years, markets in India and Africa are going to be the hotspot for 3.5/4G wireless internet service through cell handsets. I imagine that their governments will encourage the building of cell infrastructure because they can see how cell access is helping people become upwardly mobile.

Re:

[by Anonymous Coward]

The more benevolent, stable, governments will, but the last thing that the kleptocracies and dictators want is upward mobility for their people. It might give them an actual voice in their government. Still, this is good knews for the poor in many countries.

Re:

[PunkOfLinux (870955)]

I don't really think they care about upward mobility... more about "How can we either a) make ourselves look better to the world or b) make more money in taxes?"

Re:

[Yvanhoe (564877)]

You would be already surprised by the low cost of cell phone communication there...

Re:

[0100010001010011 (652467)]

One of my friends just went back home to his (hoping to be fiance) so that he could ask for her hand in marriage. 16 hour flights both ways so he could beg the elders to have her hand. He's an engineer, she's a med student. They've both been in the US for 6+ years and all the elders kept getting hung up on is that his family is of a lower caste.

In the end he ended up getting the thumbs down, they're still dating but the marriage is postponed.

Re:Poverty

[TheRaven64 (641858)]

Part of the problem, I'm told, is the way in which they abolished it. They took the affirmative action idea to extremes and instituted caste quotas for various professions. The main effect of this was to create a large, visible, set of people from the lower castes who conformed to stereotypes - insufficiently educated to perform their jobs - and cause resentment amongst the people from the other casts who were displaced in favour of someone who wasn't qualified. Unfortunately, a caste system isn't something you can abolish quickly.

Re:

[homer_s (799572)]

Last I checked India was still in the caste system

Yep, we are all "in" the caste system here. Everyday, when I wake up my grandfather asks me if I've been "in" the caste system. On most days I do and I can answer honestly. But on some days, I'm late to the office and I have to lie to my grandfather. Of course, my office has its own caste system so I make up during the day.

Does it make you feel better about yourself when you open your mouth to blab about stuff that you have no clue about? Let me guess

Re:Poverty

[by Anonymous Coward]

Ah, an American. Of course, America has no caste system as everyone treats everyone else as an equal all the time.

despite widespread poverty

[frovingslosh (582462)]

despite widespread poverty, India has the world's fastest-growing cellphone market

I'm guessing that cellphonr technology must be a lot more affordable in India than it is in the U.S.A. Can anyone tell us what cellphone costs are in India, and, if I'm right, why someone can't offer a similar price structure in the United States?

Re:

[MarkKnopfler (472229)]

About a year back voice connectivity and edge data cost about 350 INR a month. At present exchange rates it is 8 USD a month. Significantly lower. However one must remember that real-estate and labour costs are much lower in India.

Re:

[by Anonymous Coward]

Well India has got so many cellphone users because:

1. People may be poor but the cellphone compnies arent :) Here are a few mobile operators:

TATA
Airtel
Reliance
Vodaphone

and the list goes on. Reliance operates the world's biggest CDMA network. These companies have the financial capability to lay there own fiber network accross India and opera PAN india mobile networks.

2. Competition: Well, unlike other countries, there is a lot of competition among these mobile operators. They will install a mobile tower in t

Mobile is the way to go

[prayag (1252246)]

I know the mCheck people and they are doing great work. They face 2 major challenges :

1. Getting more and more mobile operators and banks on board.

2. Keeping their cost low. IIRC, each transaction costs them about Rs. 2-3 which is quite high if you think of transaction size of Rs. 20-30

However, mobile penetration is ever-increasing in India. It is one of fastest growing telecom markets in the world. And I've been told of places in India where there is no electricity but the people have mobile phones. (There is an awesome story about how they charge their batteries, but that for some other time).

So mobile is the way to go not just for for democratization of information but also for economic liberation of the people.

Cheers !!!

Duh...

[apathy maybe (922212)]

Of course China and India have the largest cell phone populations in the world... They have more then 1 third of the worlds population between them.

(Know why more people are using cell phones and not land lines? It's a shit load easier to throw up towers then to run cables. And a shit load easier to guard against people stealing the metal for raw materials.)

Cell phones are great for poor people, especially farmers. They can ring up potential buyers before travelling a day to market. (They might travel south instead of north.)
I've also read that they are used to send money back home for people (from the country side who live) in cities. They buy cell phone credit, then they ring a fellow in the home village and tell him the voucher number, and he types it into his phone and gets the credit, and then gives that amount of money (minus a small fee) to the family.

Innovation comes, so often, from necessity.

Re:Duh...

[amccaf1 (813772)]

Of course China and India have the largest cell phone populations in the world... They have more then 1 third of the worlds population between them.

Exactly, which is why statements such as "the second largest number of cellphone users (after China)" are mostly useless at conveying information.

Tell us what the number of cellphones per capita is and in comparison to the rest of the world. Then you'll be telling us something useful...

never mind the phones...

[owlnation (858981)]

... in India, they still have banks!!! They're RICH!!!

Iqbal Quadir Long Now talk

[doom (14564)]

There was a Long Now Foundation talk covering the early stages of this story by Iqbal Quadir. (He was the guy who had the idea that the Grameen bank could fund cellphone purchase in small rural areas). Here's their written summary of the talk: Iqbal Quadir, "Technology Empowers the Poorest" [longnow.org] (If you poke around on the site you can find the video of it, or listen to the mp3):

[...] a remarkable invention of another Bangladeshi, Mohammad Yunus, who developed micro-financing (and later won a Nobel prize for this invention). In Yunus' scheme a woman who owned virtually nothing could get a loan of $200 to purchase a cow. She would then sell the surplus milk of the cow to pay back the loan, earn both milk and an income for her family, and maybe buy another cow. Ordinarily, no bank would have lent her this trifling amount because she had no collateral, no education, and the costs of overseeing such a small loan with small gains, would have been prohibitive. Grameen Bank, Yunus' creation, discovered that these illiterate peasants were actually more likely to repay these small loans, and were very happy to pay good interest rates, and so that in aggregate, these micro-loans were more profitable than loaning to large industrial players.

Quadir proceeded to ask, what if the women could rent a cell phone instead of a cow? Grameen Bank could make a micro-loan to the poor for the purchase a cell phone, which they then could sell/rent minutes to the rest of the village. The enterprising phone-renter would benefit and more importantly, the entire village would benefit from the connectivity. It did not really matter if the minutes were expensive, because when you have no connection, you are willing to pay dearly for it. Quadir started off his GrameenPhone with 5 cell towers, and eventually GrameenPhone erected 5,000 towers.

Microloans = Too much banking regulation

[TheSync (5291)]

The only places in the world you see the need for microloans are in countries where there is too much bank regulation.

Here is what the Index of Economic Freedom [heritage.org] says about Indian banking:

India's 28 state-owned banks control about 75 percent of loans and deposits, and 29 private banks and 31 foreign banks make up the rest. The government owns nearly all of the approximately 600 rural and cooperative banks and most other financial institutions. Banks must lend to "priority" borrowers. Foreign ownership of banks and insurance companies is restricted.

That's why there is microlending in India, the banking system is almost totally an inefficient government monopoly.

Re:Food, water, shelter not necessary. Nokia 6220!

[by Anonymous Coward]

It does not make sense to you, because you are thinking of progress only in traditional way.

India does not work that way. It is a chaotic system, with a lot of entropy, and has lot of redundancy built in. Normally, you would expect a country/society/country to move bottom to top. i.e. improve life in terms of health, economy and education, then move on to develop better means to accelerate the progress. But it has not work in India. There are lots of social, economical, religious factions and factors why India can not operate that way. It is a country of conflicting priorities.

The result is that we have successful space programs, successful telecommunication infrastructure while still a lot people die of hunger. But somehow, we have still managed to get better - though not in very rapid/efficient way. There are less % of people below poverty line (even if you do not believe government numbers), life expectancy has improved. At the same time, villages are breaking up and cities are clogged.

So, its erratic, and it does not make sense. But we still have just launched our moon mission. Go figure.

Re:Food, water, shelter not necessary. Nokia 6220!

[stevejsmith (614145)]

Well then it's a good thing we have people like you who can tell poor Indians that they're too stupid to make their own decisions.

Somehow, I think that the person whose life is on the line if they don't spend their money on the right things is probably more qualified than you when it comes to knowing what decisions they have to make to keep them alive.

Re:Food, water, shelter not necessary. Nokia 6220!

[stevejsmith (614145)]

An "irresponsible lender" who makes loans nobody can pay back isn't really doing himself any favors, you know.