The ubiquitous nature of poverty around the world is easily apparent to anyone who opens their eyes to see it Almost half the world- more than three billion people- live on less that $2.50 per day. The poorest 40 percent of the worlds population account for five percent of the worlds income. Over 70 percent of those living in poverty are women. Half the worlds children-1 billion- live below the poverty line. In a society with prominent international organizations dedicated to the eradication of this widespread poverty, it would seem that nothing has been done. This criticism may seem harsh, but in reality the measures that have been undertaken to combat global poverty have been ineffective at best and wasteful at worst. Through trial and error it has become clear that attempting to treat the side effects of poverty, such as hunger and illness is not enough when done alone; society needs to target the source of the poverty in order to make any sort of solutions. However, new initiatives promoting ,microfinance through mobile phone technology in developing countries is promising in the fight to end poverty, particularly in the case of women, as well as aid in the attainment of the millennium development goals.
Some question how access to banking will have a substantial impact on poverty reduction. The truth is that microfinance is an unparalleled path to global development Microfinance is unique among development interventions by developing countries in that it can deliver social benefits on an ongoing, permanent basis and on a large scale. Many well-managed microfinance institutions throughout the world provide financial services in a sustainable way, free of donor support. Microfinance thus offers the potential for a self-propelling cycle of sustainability and massive growth, while providing a powerful impact on the lives of the poor, even the extremely poor. Evidence shows that this impact intensifies the longer clients stay with a given program, thus deepening the power of this virtuous cycle. For example, an impact assessment study by UNICEF of BRAC in Bangladesh suggested that members who stayed in the program for more than four years increased household expenses by 28 percent and assets by 112 percent. Additionally, comprehensive study of microfinance conducted by the World Bank in 1990 elucidates the positive impacts it has in the developing world. The study looked at three of the largest programs in Bangladesh- Gremeen Bank, BRAC and RD-12- and found that female clients increased household consumption by 18 takas for every 100 takas borrowed, and that 5 percent of clients graduated out of poverty each year by borrowing and participating in microfinance programs. More importantly households were able to sustain these gains over time. There were also spillover effects in the village economy. In effect all of this research asserts the point that if villagers empowered through a method to effectively manage their money, as well as access to even small amounts of capital, they are in fact able to build themselves out of poverty in a sustained and self-determined way.
Currently, over 90 percent of the worlds poor do not have access to safe affordable savings accounts and resort to risky, expensive, inefficient ways to save because of the high costs or unavailability of traditional banking services. This unavailability of banking services is largely due to the high costs of physical bank buildings with dedicated bank tells that are exponentially less cost effective when serving poor clients with small deposits. However, although unstable in some cases and meager quantities in comparison to more developed nations, the poor people of developing nations can and do save money. But they usually must resort to saving in expensive, risky, and inconvenient ways, like hiding cash at home or converting savings into livestock and jewelry. Safe, affordable places to save would allow them to increase their financial security and improve their lives. In places where such services are available, it has been shown that the demand is extremely high. The inability for the poor to safely store their money in financial institutions in undoubtedly quashing the hope of any type of economic growth because the first key to entrepreneurship is access to capital. Additionally, evidence from the millions of microfinance clients around the world demonstrates that access to financial services reaches beyond capital for business ventures and actually enables people to increase their household incomes, build assets and most importantly reduce their vulnerability to the crises that are part of their everyday lives. Even beyond this access to reliable financial institutions to safe-gaurd money has led to both the empowerment of women and increased investment in education. Though traditional banking systems are infeasible in many poor regions of developing areas, the idea of mobile banking has flourished and is clearly a key to providing banking services to many without. Cell phone proliferation has been on a monumental scale, and has infiltrated even the poorest demographics, thus it is highly effective to utilize it as a banking technique.
Some question how access to banking will have a substantial impact on poverty reduction. The truth is that microfinance is an unparalleled path to global development Microfinance is unique among development interventions by developing countries in that it can deliver social benefits on an ongoing, permanent basis and on a large scale. Many well-managed microfinance institutions throughout the world provide financial services in a sustainable way, free of donor support. Microfinance thus offers the potential for a self-propelling cycle of sustainability and massive growth, while providing a powerful impact on the lives of the poor, even the extremely poor. Evidence shows that this impact intensifies the longer clients stay with a given program, thus deepening the power of this virtuous cycle. For example, an impact assessment study by UNICEF of BRAC in Bangladesh suggested that members who stayed in the program for more than four years increased household expenses by 28 percent and assets by 112 percent. Additionally, comprehensive study of microfinance conducted by the World Bank in 1990 elucidates the positive impacts it has in the developing world. The study looked at three of the largest programs in Bangladesh- Gremeen Bank, BRAC and RD-12- and found that female clients increased household consumption by 18 takas for every 100 takas borrowed, and that 5 percent of clients graduated out of poverty each year by borrowing and participating in microfinance programs. More importantly households were able to sustain these gains over time. There were also spillover effects in the village economy. In effect all of this research asserts the point that if villagers empowered through a method to effectively manage their money, as well as access to even small amounts of capital, they are in fact able to build themselves out of poverty in a sustained and self-determined way. |
| Woman in Haiti utilizing mobile banking |
One of the greatest virtues of microfinance through mobile phone technologies in developing countries is the way that it empowers women by giving them better control over household finances. In much of the developing world the role of the woman has traditionally been subordinate to that of the man and without access to money or security in a sense it has been very hard for them to change their designated role in society. Additionally, it has been shown that women are more likely than men to invest increased income in the household and family well-being, therefore getting the extra cash into the hands of women is actually beneficial for society as a whole so that the money is not squandered away and is rather invested in the future. Furthermore, access to financial services has made women clients more confident and assertive and thus better able to confront gender inequality. In a book I read entitled "1000 splendid suns," a woman in Afghanistan was in an abusive relationship and the novel made it clear that financial stability was a major reason why she was unable to escape. By giving women the ability to access the families finances it will confront at least some of the gender imbalance issues within households, and also will hopefully foster an independent spirit within women that will allow them to escape abusive relationships. In fact, in a study by Naila Kabeer it was found that in microfinance programs changes occurred at a personal level in the form of increased self-worth. At the level of the household, she finds that women’s increased contribution of resources led, in a great majority of cases, to declining levels of tension and violence. Women often reported feeling an increase in affection and consideration within the household with longer program membership. This research illustrates that the microfinance programs really change society at a grassroots level, and is even creating a greater acceptance of women's empowerment among men, which is an integral part of an evolving society.
Despite the numerous draws of the microfinance programs for global development, I initially was skeptical if it could actually help those way below the poverty line, whom the millennium development goals sought to reach. The goals claim that by 2014 they wish to cut the number of those living in absolute poverty, which is about 1.2 billion people living on a dollar a day, in half. It is difficult to imagine a banking institution, even through mobile banking, that could be financially sustainable with the small amount of deposits put in by the poorest people in the developing world. Additionally, these people are particularly unfamiliar with banking systems so the question of how to get them to utilize and trust a seemingly foreign system of storing their money is also a potent pressing issue. However, these issues have been addressed through innovative program design for example the ASA in Bangladesh channels many of its transactions through post offices. This is not only cost effective, since it doesn't need to build any new buildings or hire new workers and uses the existing network of postal systems for transaction efficiency, but is also ideal for fostering the trust of the people by using an already well established a trusted institution so that the whole operation seems more homegrown and provenly reliable. Participation of the poorest of the poor is key for success so it is essential that each microfinance development program is tailored to satisfy the needs and the culture of the country that the constituents are in to minimize costs and maximize involvement.
Although no single program will be able to eradicate global poverty, by empowering the poor with greater control over their own financial resources, however scarce they may be it will lead to a ripple effect such as improvements in healthcare, business, and education. Thus financial services do effect poverty in multiple ways and will help to attain the Millennium Development goals and more importantly, financial services will create a sustained level of prosperity and financial stability in the country that reaches far beyond the scope of the resources put in to enact the initiative.
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