Mobile banking can help the poor change their lives, giving them access to business services and enabling them to use assets effectively, according to the annual letter from Bill Gates and his wife Melinda Gates.
The letter predicts that two billion people, who don’t have bank accounts now, will be storing money and making payments with their phones by 2030.
Giving poor people access to financial services will enable them to pay in more efficient ways.
“The reason poor people face agonising choices between where to spend money is not just that they don't have enough assets,” said the Microsoft co-founder turned philanthropist and his wife.
"They also don't have access to a bank to help them use their assets effectively.
"If their savings are in the form of jewellery or livestock, for example, they can’t very well chip off tiny pieces to cover routine daily expenses.”
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Technology and poverty
Bill Gates with his wife Melinda set up the The Gates Foundation charity, which has handed out billions of dollars in grants since 1994. The trust has contributed to causes affecting the US and developing countries, and has worked on projects ranging from growing small farmers' incomes to tackling malaria across Africa.
In the latest yearly letter, Bill and Melinda Gates said mobile banking will make it easier for the poor to borrow and save. Currently, many poor people save by hiding cash around the house or buying commodities that lose value over time, it said.
Gates said the inability to transfer money and pay bills easily causes problems. “When they send money to friends and relatives to help them through tough times, they either take a day off and deliver the cash themselves or trust someone else to do it for them," said the letter.
"If people need to borrow money for an emergency, they have to pay usurious interest rates to a moneylender. Not having access to a range of cheap and easy financial services makes it much more difficult to be poor.”
In villages where people borrow or save in tiny denominations, building and maintaining a bank branch just doesn't make sense
The Gates Foundation
Fall in cost of bank transactions
In the next 15 years the mobile phone will grant much more effective access to money.
Part of the current problem is that banks cannot afford to serve poor people, because of the costs of many small transactions.
“That's why 2.5 billion adults don't currently have a bank account, according to the World Bank,” said the Gateses’ letter.
“In villages where people borrow or save in tiny denominations, building and maintaining a bank branch just doesn't make sense.”
But the companies developing mobile banking can make money serve the poor, because the cost of processing a digital transaction is almost nothing and mobile phone ownership is high.
Case study: Identity authentication in India
India is an example of a country harnessing IT to alleviate poverty. Poor people in the sub-continent do not have an identity, he said, which prevents them from opening bank accounts. But hundreds of billions of people, particularly women, do not have bank accounts.
This is one reason why the Indian government has an ID card project, known as Aadhar, which will give over 1.2 billion citizens biometric ID cards.
Giving people identity authentication will allow them to get a bank account. Shops will have a biometric readers and citizens can pay for goods with a fingerprint scan – even a bag of rice.