The Future of Microcredit is In Your Cell Phone

Imagine that if you wanted to make a payment, you didn't need to hand someone a government-sanctioned piece of paper or coin. Instead, you could just transfer money: virtually.

Um, yeah, okay, that's not exactly new or exciting to the millions of people who have access to credit cards and online banking. But for the millions of people around the world who don't have bank accounts, it is.

What those millions of people often do have, though, is mobile phones. In Pakistan, for example, the number of people who have mobile phones is ten times that of those who have bank accounts. And for such folks, the promise of mobile money means they can empty out their mattress stash and stop worrying about someone dipping into their cash. That's the magic of mobile money.

How does it work? Basically, mobile money is a method of storing cash -- like you would prepaid cell phone minutes -- on your phone's SIM card, with the ability to convert it back to cash in another location. It works pretty much like any virtual financial service, replacing an ATM or credit card with a cell phone as the middle man (or middle machine, I suppose). Amaana, an innovator for the unbanked in Pakistan has a good video that illustrates how their mobile money services are used.

This technology not only gives people without bank accounts access to virtual money, it has incredible implications for microfinance organizations and their loan recipients. The nonprofit FrontlineSMS: Credit, for example, aims to "use cell phones to make financial services accessible and affordable for the bottom of the economic pyramid." Is Executive Director Ben Lyon a little cocky for calling cell phones the "future of microfinance?" I don't think so -- this guy's got it together. He's developing this technology to enable microfinance institutions to directly lend out money through mobile phones, as well as allow microfinance loan recipients to repay their loans. What's more, he's also working on bringing the technology to those who can't afford a cell phone.

You can help Ben do even more. Currently, FrontlineSMS: Credit is a finalist in the Unreasonable Institute's Marketplace. If you pledge $10, you can help them achieve impact for one million people in just one year. You can even make your pledge with your mobile phone. That's a lot easier than taking the bus to the Unreasonable Institute and handing over a ten-dollar bill -- that is, if it doesn't get stolen or lost along the way -- and making the long trudge back home.

Photo Credit: bluesky12012