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Will mobile payments alleviate poverty and empower women in India?
Sunilchandra Dal | Monday, 13 February 2017 AT 11:18 AM IST
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A study in Kenya has shown that use of mobile payments has lifted a percentage of the population out of extreme poverty and empowered women in savings and shifting of occupations from agriculture to business. Whether the use of mobile payments in India would similarly lift families from extreme poverty and whether women would be empowered, is the interesting question Indian researchers now ought to focus on.

Mobile payments here need not be linked with the often politicised debate in India on pros and cons of demonetisation or measures for dealing with the cash crunch. More importantly, mobile payments can play an important role as a financial tool with poverty alleviating benefits in the long run. This is one of the lessons one can pick up from the study. Kenya, with a population of 4.5 crore, seems to be leading the rest of the world when it comes to mobile payments.

According to the Communications Authority of Kenya, the mobile penetration is 88 per cent, which means 3.96 crore Kenyans are using mobile phones. Mobile money transfer service subscriptions are estimated at 2.87 crore, mostly through M-Pesa (here ‘M’ stands for mobile and Pesa means money in Swahili). This would put the percentage of Kenyans using mobile money service at 63.7 per cent.

MIT economist Tavneet Suri, an associate professor at the MIT Sloan School of Management, co-authored the paper with William Jack, an economist at Georgetown University. The study concluded that since 2008, access to mobile-money services increased daily per capita consumption (total money spent by the individual and household) levels of 1,94,000 or 2 per cent of Kenyan households, lifting them out of extreme poverty, which means living on less than $1.25 per day.

Female-headed households saw greater increases in consumption. Moreover, mobile-money services helped an estimated 1,85,000 women move from farming to business or retail occupations.

The researchers feel that more secure storing of money leads to better financial management and savings. In male-headed households, mobile money could give women, who are also usually secondary income earners, more financial independence, which could help them start their own businesses.

In India, according to World Bank and Telecom Regulatory Authority of India (TRAI), the number of mobile phones is 1,049,740,000 for a population of 1,295,291,543, which means penetration is 82.17 per cent as of September 30, 2016.

However, GSMA has claimed that on average, each user has 2.2 SIMs and so the total number of individual mobile subscribers could be as low as 26 to 30 per cent. Secondly, only 40 per cent of mobile users are said to be based in rural areas.

The slow growth in mobile payments service in India was partly due to the rule that they have to be attached to a bank and only 5 per cent of bank branches are in rural areas. The advent of payment banks, however, changes the picture and could increase financial inclusion.

NGOs would have to be roped in to encourage people with basic mobile phones to use mobile payments. The government too could make basic mobiles cheaper to increase mobile penetration.

While the focus on GDP figures and projections is important to judge the economy, Indian researchers should also focus on the ‘bottom of the pyramid’ (BOP) where people can afford basic mobiles. Only here, they may note over the years, as Suri did in Kenya, an exciting growth story. Will mobile payments lift people out of extreme poverty and empower women? The BOP are the people to watch and only time can tell if what worked in Kenya will also bring about a change in India for the better.

Simplicity is the key
Rachel Botsman, writing in the Australian Financial Review, narrates the interesting anecdote that it was a thief, in part, who unwittingly started one of the biggest revolutions in banking. In 2006, in a small village in Kenya, a woman had her bus fare stolen. She happened to be taking part in a microfinance pilot project by M-Pesa on how micro-loans could be issued through basic mobile phones. The passenger’s husband realised he could use the service to quickly transfer a small amount of money to his wife’s phone to help her pay for the bus ride. The M-Pesa team recognised the gap in the Kenyan financial services sector: the ability to easily and cheaply transfer money person-to-person for all kinds of transactions. Botsman estimated the total value of Kenya’s mobile money transactions as equaling 25 per cent of the country’s GDP in 2014. According to Botsman, the solution to mainstream mobile banking might be simply a basic SMS-enabled phone instead of fancy smartphones, apps or high-speed Internet.

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