Microfinance Banking w/ Cell Phones

I've been performing some research on emerging modes of financial service delivery in the developing world. This particular YouTube clip demonstrates a clever Filipino adaptation of using cell phones to transmit and receive funds. As some of you may know, the Philippines has the highest volume of text messaging anywhere in the world. At the same time, financial services are sparse in rural areas of the country since bank branches there are more widely dispersed. Throw in a marginal transportation infrastructure and accessing financial services becomes even more difficult for rural residents. They often have to resort to moneylenders and fly-by-night operators charging exorbitant rates.

Recently, however, a public-private partnership (PPP) involving Globe Telecom (the telecoms subsidiary of the country's largest business conglomerate), government-owned rural banks, the US Agency for International Development (USAID), and the Bill and Melinda Gates Foundation have banded together to promote cell phone microfinance by piggybacking on the short-messaging system (SMS or text messaging). This financial service is called GCash. Users can (1) pay bills, (2) repay loans, (3) make deposits, (4) make withdrawals, (5) load prepaid phone time, (6) buy and sell products and services, and get this--(7) send or receive remittances internationally. The last application is the most exciting one from my point of view as nearly a tenth of the Philippine population works abroad. Already, they have signed up a growing list of international partners to enable overseas workers to send remittances home with fees lower than those usually charged by conventional transfer services.

Finally, let me take this opportunity to note that this project is but one of the countless innovations you can find on the always-fascinating Development Through Enterprise site, which I've had on my blogroll since day one. As I've mentioned, harnessing creative means of alleviating poverty and not trying to be a China Jr. is likely to be a more fruitful path to progress for the Philippines as it is for several other developing countries.