Microfinance

Mobile phones have made the headlines this year due their role in political organizing the world over, from the aftermath earthquake and environmental protests in China to political campaigns here in the United States. Now, what many have recognized as the true power of mobile technology is being realized in Africa. In Tuesday's Guardian, Richard Wray writes that "the dramatic spread of the handset is revolutionising the way money circulates."

For consumers in developed markets, using a mobile phone for banking services is a smart add-on to a bank's branch network. But to people in the developing world, the arrival of mobile banking - or m-banking - is potentially revolutionary.

If money is an economy's lifeblood, improving its circulation plays a critical role. Many Africans living in rural areas, for instance, rely on money sent home by members of their family who work in towns and cities. But getting that cash to a village that could be hundreds of miles away is a tricky business. In Kenya, for example, workers in urban areas hand wages over to bus drivers, who promise to stop off at the worker's home village en route to their destination.

Even those who do have a bank account - and they make up only a few per cent of Africa's 950 million population - are restricted in what they can do with their money because of the dearth of branches in rural areas.

But the dramatic growth in mobile phone use in Africa - phones now outnumber cash machines by several thousand to one - is paving the way for a new set of services that turn the humble handset into a banking tool with the potential to transform Africa's economy.

Services have sprung up that let people transfer cash by text message to other mobile phone users and give Africa's vast number of "unbanked" their first access to financial products. Instead of using a bank branch, these services rely on local retailers who already sell mobile top-up cards.

"We wanted to offer something that would work," explained Mung Ki Woo, who heads Orange's m-payments division. "Instead of giving people a plastic card, why not use something many people already have: a mobile phone? And instead of doing transactions at a bank branch, why not let people go to their local retailer to deposit and withdraw cash?"

The article goes on to discuss the proposed creation of m-banking systems that allow access by all users, regardless of cell phone carrier. It also discusses the expansion of this technology to microfinance, which would potentially allow these small loans that have changed the lives of millions for the better to be expanded to many times more people.

M-banking is truly revolutionary, and a broad-based implementation that allows mobile technology to substitute for visits to banks will have dramatic economic development impacts. The emergence of technology that enables bottom-up politics and banking may yet be the beginning of a new era of prosperity and engagement that will be felt globally.

Last week was my dad's birthday and much like most children around holidays, I started tearing my hair out trying to find a fitting present. I couldn't decide whether to go with a tie that he would never wear, or golf binoculars that would never be used since all his shots slice into the woods (sorry Dad). Ultimately, the day was saved with a Kiva.org gift certificate.

Started in March of 2005, Kiva.org is modernizing the way every day people can help problems in the developing world. The organization's focus is through an intricate system of microloans aimed at allowing any everyday person to directly loan money to a person of their choice somewhere else in the developing world. Kiva.org works with microfinance organizations and then posts on their website a list of individual people in need of a certain amount of money. Whether it be basket weaving, raising livestock, or selling produce, individuals are now directly getting the money to start their own business. As an "investor" you can choose exactly which person you would like to directly loan money to and in return the overseas entrepreneur will provide you with updates about how the business is going. In addition, while you have the option of donating as much money as you would like, Kiva.org loaners typically loan anywhere from $25-$500 dollars thus revolutionizing the way people are able to support these developing entrepreneurs. Eventually, your investment is paid back, without interest, and then you can either take your money back, or reinvest it in another entrepreneur elsewhere in the world.

To date, 251,966 people have loaned $22.8 million, with an astounding repayment rate of 99.87%. By breaking the mold of normal donations, people looking to help the developing world can do so by making individual choices, rather than donating to large global organizations like the Red Cross or Amnesty International where once you donate your money, you simply must trust that it's going to good use. Furthermore, with such a hands on system, people are widely using Kiva gift certificates, as mentioned earlier, and further promoting the program in whole.

An important lesson is being taught though the example of Kiva. As we've known for quite some time now, the Internet is completely changing the dynamic abilities of the individual. As we can see in the recent presidential primaries, grassroots efforts are proving to be the most valuable tool in candidates arsenals in spreading awareness, gaining support, and raising money at a rate never before seen. This model being applied to something even as obscure as microfinance underlines the strength of utilizing grassroots efforts to any variety of fields. With people now more interconnected than ever before, the possibilities are virtually limitless. Now the next real question is how can we apply this model of 250,000 individuals working separately towards a single goal to other areas in need, and revolutionize every cause with the support of thousands of active supporters.