An article posted yesterday on Voice of America's website suggests that a new mobile banking service in Kenya could eradicate poverty in the country.What's the connection, you may wonder, as we did.
The Equity Bank/Safaricom service is basically set up to bank the unbanked in Kenya. According to the article, most Kenyans up to now have been unable to open accounts or take out loans. The average annual income in the country is $1,600, which means 60% of the population can't meet the minimum balance for a bank account, and those in impoverished areas lack the required formal employment and credit rating necessary to take out a loan or account.
The opportunity to obtain small bank accounts and loans, often called microfinance, could enable Kenyan entrepreneurs build startup capital for new businesses and help people develop savings.
"It allows our customers, many of them previously unbanked, to retain the features of M-Pesa services while enjoying banking services: short-term loans, medical and personal insurance, accident insurance, availability of credit have also been built in," said Safaricom CEO Michael Joseph in a statement. "But we cannot overemphasize the potential of this product to introduce a savings culture amongst Kenyan people."
The new account, called M-Kesho, will allow Safaricom's mobile phone customers to deposit money into accounts with Equity Bank. It builds upon Safaricom's M-Pesa service, which is said to have 10 million users and allows Kenyans to store, withdraw and transfer money. In addition to storing money with Equity Bank, M-Kesho customers will be eligible to earn interest on deposits and have access to small, short-term loans known as microcredit.
It will surely take time and a variety of efforts to bring financial prosperity to Kenya. But the Consultative Group to Assist the Poor, a collection of 33 agencies that work to help poor people in developing countries, has identified several principles for this work, the first of which is: "Poor people need not just loans but also savings, insurance and money transfer services." This new mobile bank account does provide for those needs.
And previous experiments with microcredit, such as Grameen Bank's initiatives, which now serve seven million Bangladeshi women entrepreneurs, have shown it can make a difference in certain sectors of poor countries.