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Cellphones Communications The Almighty Buck News

Cellphone Banking Helping To Fight Poverty In India 76

Posted by Soulskill
from the will-it-work-here-too? dept.
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."
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Cellphone Banking Helping To Fight Poverty In India

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  • by hansraj (458504) on Saturday October 25, 2008 @12:49PM (#25510047)

    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 (Score:4, Insightful)

      by Lonedar (897073) on Saturday October 25, 2008 @12:55PM (#25510085)
      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: (Score:2, Insightful)

        by 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.

    • You linked to the wrong section of the FAQ. I believe that you meant http://www.mchek.com//popUp_faq.htm#a7 [mchek.com]

    • by 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: (Score:3, Interesting)

      by 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 (Score:5, Insightful)

    by TubeSteak (669689) on Saturday October 25, 2008 @12:52PM (#25510059) Journal

    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: (Score:2, Insightful)

      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.

    • 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?"

    • by Yvanhoe (564877)
      You would be already surprised by the low cost of cell phone communication there...
  • by frovingslosh (582462) on Saturday October 25, 2008 @01:02PM (#25510129)

    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: (Score:3, Informative)

      by 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: (Score:3, Interesting)

      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

    • by jagdish (981925)

      why someone can't offer a similar price structure in the United States?

      Greed.

    • by abjbhat (1203056)
      Plenty of variations depending on the operator but, incoming calls are always free. Here's what I pay- Local SMS/Text - 0.10INR National SMS/Text - 0.50 INR Local calls - .50 INR(Mobile) - 1 INR (Landline) National calls - 1.50INR (Mobile/Landline) Unlimited Data - 99 INR/week (Gprs like speeds) Some more reductions if its past 9 pm, but anyway...that's cheap enough!
  • by prayag (1252246) <prayag...narula@@@gmail...com> on Saturday October 25, 2008 @01:12PM (#25510177)

    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... (Score:5, Informative)

    by apathy maybe (922212) on Saturday October 25, 2008 @01:17PM (#25510197) Homepage Journal

    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... (Score:4, Insightful)

      by amccaf1 (813772) on Saturday October 25, 2008 @01:21PM (#25510237)

      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...

      • by prayag (1252246)

        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...

        Mobile penetration in India stands at about 15-17% and growing at a rate of about 20%, IIRC.

      • Its the ratio of people who have access to banks vs. the number of people who have mobile phones that matters.
  • by owlnation (858981) on Saturday October 25, 2008 @02:13PM (#25510651)
    ... in India, they still have banks!!! They're RICH!!!
  • P2P lending will be the way all banking is done in the future. The task of millions of computers automatically distributing tiny amounts of money among themselves seems to require immense amounts of data storage & transaction processing, there's no reason the software can't be done.

  • I hate to sound cynical, but here's what's really going on.
    You see, the poor people of India have been ripped off so many times that the use of gold for savings and financial transactions is deeply embedded into their culture. That drives the central bankers of the world, and especially in India absolutely batshit crazy, because it deprives them of the opportunity to water down peoples money and keep the difference for themselves while saddling the poor with inflation and debt. This wasn't so unbearable a

    • by Anonymous Coward

      I hate to sound cynical, but here's what's really going on. You see, the poor people of India have been ripped off so many times that the use of gold for savings and financial transactions is deeply embedded into their culture. That drives the central bankers of the world, and especially in India absolutely batshit crazy, because it deprives them of the opportunity to water down peoples money and keep the difference for themselves while saddling the poor with inflation and debt. This wasn't so unbearable as long as India was just some destitute pit-stop. However, now that the economy is industrializing and growing, the mere thought that people might actually get to keep the value of their earnings is causing them to desperately seek any kind of "solution". Micro-loans, cell phone transactions, free college level "economics" courses for everybody in India, massive public relations campaigns, you name it - they are desperate to get India away from gold.

      You see, it's not just about money, but control. By using gold, it would force all new investment capital in the economy to come from savers and producers instead of central bankers and their backed governments - that just print it up.

      So do you actually think it would be safe for any person living in a Bombay slum to be carrying gold? Is it actually practical to use gold to pay for everyday goods and services? These micro-finance systems are aimed at 1) providing a safe alternative to carrying cash and 2) an alternative to incumbent banking facilities that are either out of reach or simply too expensive and not suited to large amounts of very low value transactions

  • I keep waiting for the Slashdot trolls to come out with their standard response to India stories - "Why are they doing when they cant feed themselves" Incidentally when I worked in Europe I never saw a beggar (guess the dole works). Not so in Toronto and Austin. Austin beggars are passive except on Guadalupe where they can give the pushiest Indian beggar good competition. But the funniest beggar I saw was the one sitting outside the McDonalds in downtown Toronto with a 'Change please' sign. Whenever he had

  • by doom (14564) <doom@kzsu.stanford.edu> on Saturday October 25, 2008 @08:32PM (#25513369) Homepage Journal

    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.

    • by Beetle B. (516615)

      I was just about to mention this. And he beat the Indians to it - he started this in Bangladesh. I just watched Iqbal's talk [ted.com] at TED a few days ago.

  • by TheSync (5291) on Saturday October 25, 2008 @11:46PM (#25514567) Journal

    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.

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