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Parliamentary Brief24For poorpeoplea mobilecan alsomeana bankSuzi Sosa& Marcela X EscobariPhoto: VodaphoneAs we strive to reach the MillenniumDevelopment Goals, our modestsuccess in the ambitious aim ofreducing global poverty has been overshadowedby an unsettling trend toward widerincome inequality. Without a doubt animportant factor in this trend is the increasingdisparity in access to markets.Why is access to markets important? Incountries where the competitive provision ofgoods and services is weak, not only is theirdelivery unpredictable, expensive, and oflower quality, but opportunities for wealthcreation through the provision of goods andservices by individuals and businesses arelimited as well.Moreover, future innovation in productsand services for a specific market is limitedby access to technology and infrastructure.Over time people excluded from thesemarkets are left further and further behindas innovations built on previous technologiespass them by. For example, the invention ofthe TV remote control becomes irrelevantto those without access to electricity, andonline banking is of no use to someonewithout internet access.One area where this is starkly apparent isin the market for financial services. Accessto financial services gives people the abilityto save for lean times, smooth consumption,provide better healthcare andeducation for their children,and allows entrepreneursto start and grow new businesses.Yet more than two billionpeople around the world areentirely without these servicesand lack even a basicsavings account. Even morepeople are under-servedand are faced with severelylimited services that do notmeet their needs.In some areas this is dueto a lack of infrastructure,but more often the meagreincomes and small transactionsizes of this populationdo not justify the high fixedsetup costs involved inmaking financial servicesavailable through physicalbranches. Thus traditionalbanking results in prohibitivelyhigh costs for customersto set up and use a bank account.For example, in Cameroon it takes anaverage of $700 to open a checking accountand banks require applicants to provide atleast four documents. Not surprisingly, only20 per cent of households in sub-SaharanAfrica have an account at a financial institution,and in some countries like Tanzaniaaccount ownership is as low as five per cent.This pattern persists not only betweencountries but within them. Rural communitiesare especially prone to being excludedfrom financial services. In India, 60 per centof the adult population has a bank account;however, in rural areas account ownership isless than 40 per cent.The solution to this problem will notcome from simply increasing the globalfootprint of mainstream banks whosestructures are often ill-designed to servethe needs and cost-constraints of the poor.Instead the most exciting opportunities arecoming from a combination of disruptivetechnologies and a deeper understanding ofthe needs of under-served customers. Forexample, several companies are deployinginnovative applications that take advantageof the ubiquity of mobile phones to createmore affordable, accessible and customercenteredfinancial services that leapfrogtraditional offerings.Companies like Globe Telecom andSmart Communications in the Philippines,WIZZIT in South Africa, and MTN,Celplay and Safaricom throughout Africaare providing users with the capability forSMS-based financial transactions that allowinstant person-to-person money transfers,including receiving remittancesfrom family membersabroad with a simple textmessage from one phone toanother.Going a step further, aservice from Rêv Worldwideand MPOWER Mobile providesnot only an SMS-basedmobile payments platformbut also links directly to auser’s reloadable debit card,giving users the ability tobuy and sell products andaccept debit and credit cardpayments using their mobilephone. In Kenya, Safaricom’sM-PESA has attracted threemillion users since its inceptiona year ago, showingthe latent demand for thesepayment services and therapid adoption of the technologyin developing countries.Innovations like mobilebanking will not only helpthe poor move away from cash transactions,but may open growth opportunities forsmall- and medium-sized companies. SMEsare an important engine of growth which isoften anemic in developing countries: fewSMEs exist, and even fewer actually growto become large companies. By reduc-OCTOBER 2008