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Technological innovations are rapidly moving microfinancing operations off paper and onto mobile devices and the internet, experts agreed at the student-organized Chicago Microfinance Conference on May 7 at Harper Center in Hyde Park.
The undisputed gem of technological advances is M-Pesa, a phenomenally successful phone banking system started three years ago in Kenya that allows microfinance institution (MFI) agents to make money transfers for remote rural customers. The technology has made microfinancing available to a staggering number of poor villagers.
“As of January 2010, M-Pesa has about 9 million customers, 17,000 agents who carry out transactions throughout whole country, and about 310 million in monthly transfers,” said Sarah Rotman, associate microfinance analyst at the Consultative Group to Assist the Poor. “It’s being used by a vast majority of people throughout the country, a lot of them who were previously unbanked.”
Rotman was among panelists who spoke on “Getting ‘Techy:’ Can Technology Innovations Transform Microfinance?” The daylong conference was organized by Chicago Booth students in the Emerging Markets Group as well as the Harris School of Public Policy.
The huge response has propelled a lot of big mobile phone operators across the world — including Zain, MTN, Orange, and Telenor — to roll out their own systems, she said. “Everyone’s getting their foot in the door to stay competitive.”
The ironic beauty of using mobile banking to reach low-income rural customers is that cell phones are — surprisingly — everywhere in the developing world, according to Scott Bellows, ’03, regional director of Asia Pacific, Kiva Microfunds.
“You’d be amazed — there’s no electricity, but they can charge a phone with a car battery or they might put a huge antenna on top of a tree and get a signal, so everyone can use a cell phone,” Bellows said.
Another technological success is Kiva, which uses the internet to connect rural entrepreneurs to lenders across the globe. Its website tells the stories of people wanting loans for such ventures as a vegetable stand. The site allows everyday individuals to lend $25 or more to any entrepreneur whose story moves them.
“With Kiva, going onto a website and seeing photos of clients and reading their stories brings a large level of transparency to the industry, whereby you don’t just loan money that goes into a black box,” Bellows said. “You actually see where your money is going.
The long-term goal of Kiva, according to Bellows, is to “have people go onto the website, see clients, and lend to clients directly without having to go through microfinancing institutions.”
Cloud computing is another relatively new innovation that is gradually expanding into new markets and is positioned to become the next big thing, said John McMahon, director of the Salesforce.com Foundation, a nonprofit entity of Salesforce.com.
Cloud computing allows consumers and businesses to use applications without installation, and to access their personal files at any computer with internet access.
“We’re trying to make it financially feasible, and we also have a number of partners that are developing applications for MFIs, so I think that is going to increase the acceptance and delivery of it. One of real values of the cloud computing platform is that most MFIs are multinational, and you’ve got all of that data rolling into a single database.”
—Mary J. Paleologos
Read what MFI panelists said about bringing clean energy to developing regions at the conference.