Cell Phones Change the Way Money Moves
Financial Services for Everyone - Agent Banking in the Democratic Republic of Congo [Source: https://www.youtube.com/watch?v=qFwR7JWaQPY]
The mobile digital device is changing the world in more ways than you think. In the field of microfinance, for example, the humble cell phone is revolutionizing the rift between the world's richest and poorest communities.
Microfinance has officially been around for decades. But it was a labor of love in that loan organizations sent representatives to some of the remotest areas on earth to sign people up for loans and make the payments in person. Now, however, a cell phone connection allows budding entrepreneurs in even the poorest of countries to solicit and receive loans digitally. They don't have to wait for the banker to come to their villages with signed bank checks.
According to latest reports, by 2020, almost 70% of the world's population, including those residing in emerging economies, will have super computers or smartphones in their pockets. In countries like Indonesia and Philippines, the financial inclusion rates are less than 30%, but mobile penetration is above 70%. The figures speak for themselves - we are witnessing a revolution in which money will move quicker and in more ways than we can imagine. In fact, the president and CEO of microfinance giant FINCA, Rupert Scofield, recently said in an interview that digital devices are so radically changing the loan landscape that financial and relief enterprises are having to re-draw their traditional loan programs. Clearly this is a problem everyone enjoys having to face: the ability to bring more funds to underserved areas of the world.
For their part, FINCA is embracing the overall technological progress by advocating biometric fingerprint scanning for borrowers. Sensors allow more borrowers without national ID cards to access much needed funding. Big Data has also enabled loan agencies to verify where the funds are going so that there is less fraud. Transparency is just one of the results of how digital devices are letting more people access loans. They can connect to outlets via their mobile phones and be verified by certain loan agencies almost instantly.
In the old days, that kind of verification could take weeks, according to Scofield, who refers to the onset of digital borrowing as the 'second great disruption' in the history of microfinance. The first great disruption was when microfinance agencies began traveling to the global south some four decades ago and letting would-be entrepreneurs know that funding for innovative ideas truly exists and is accessible.
What many microfinance organizations are doing is the logical next step: They're teaming up with large telecommunications firms to reach more people.The borrowing process is currently changing because of smartphones, credit scoring, and the power of Big Data. But the genesis of every great idea begins with a person. That's something that digital tools will never replace. They'll simply make their access to much needed funding all the more seamless.
Indeed, digital power is making the 40-year-old field of microfinance far more productive. Not unlike the effect of digital on almost every other global enterprise. It won't be long before someone in the world's most impoverished village will be able to submit a loan request via her mobile phone and get an answer within minutes. Consider the fact that today, according to FINCA, in a country like Nicaragua, there are 550 clients for each loan officer. So the work of loaning funds can only go so quickly.
When digital tools fully replace these officers, much needed funding will get to those who are requesting it. The next financial powerhouses could very well come out of the emerging markets. Given the right digital tools and funding, these entrepreneurs will be able to bring their fresh perspectives on global trade and disrupt markets that have traditionally been dominated by Western firms.