Cell Phone As Wallet

"Grameen Bank has an impact on the poor, GrameenPhone on the entire economy"

- Muhammad Yunus, founder, Grameen Bank

What exactly are people in developing nations doing with cell phones, especially those at the Base of the Pyramid (BOP)? Yes, they're talking and texting each other, but why, and to what end? And how is that changing entire economies? What you are about to learn stretches far beyond our Western paradigm of cell phone use and productivity.

It is mind-boggling to learn that people living in poverty without electricity, modern transportation, or even (land line) phones, suddenly connect to the global banking grid, moving from an informal cash culture to a formal debit and credit culture, sending and receiving money and payments from inside and outside their own countries, doubling or tripling their incomes and "graduating" from poverty, all because they now have access to a cell phone! Prepaid cell phones loaded with minutes have become digital wallets, with minutes redeemable as cash at the local store used to then purchase basic needs like food and fuel for lamps!

"Connectivity is Productivity" - Iqbal Quadir, co-founder GrameenPhone, and the "Village Phone Program"

Cell phones are causing a social and economic impact much more dramatic and disruptive than ever expected. GDP's have risen while poverty levels are decreasing. Studies indicate that adding 10 phones per 100 people adds 0.6% to the GPD of a developing country. Extrapolating from the UN figures on poverty reduction (1% of GPD growth results in 2% poverty reduction) that 0.6% growth would cut poverty by roughly 1.2%. Given 4 billion people in poverty, that means that with every 10 new phones per 100 people, 48 million "graduate" from poverty!

Mobile banking in developing countries is just the beginning of an expected avalanche of services and applications that collectively will constitute mobile commerce (m-commerce). After voice communications (and texting, in some cultures), connection to financial services is the first big "killer app" for cell phones, initially manifested in 3 ways:

1. Storing money in the phone and using it as a  virtual ATM
2. Sending and receiving remittances, with superior delivery and reduced transaction cost
3. Retail purchasing and bill paying, both at preselected outlets

In Bangladesh alone, through GrameenPhone, there are 10 million subscribers reaching 100 million people through 250,000 village phone ladies! The first village phone lady, Laily Begum bought a cell phone from GrameenPhone with a microloan from Grameen Bank, leased phone time to other villagers, in essence becoming a village pay phone. With the profits, Laily repaid the phone loan while doubling her annual income to over $750, twice the average income in her village! Today, Laily and her husband own five shops and a restaurant, and together earn $2,500 per year. Because of its success in Bangladesh, this Village Phone Program model has rapidly spread around the world to countries like the Philippines, Rwanda, and Uganda, to name a few.**

In Zimbabwe, Strive Masiyiwa, a devout Christian, owns Econet Wireless, the 5th largest telecom company in Africa with revenues over $300 million per year. Strive would be an excellent partner for Crown to explore how to deliver relevant marketplace solutions to the BOP.

Finally, remittances are huge in developing countries outpacing investments and foreign aid at the rate of $300 billion per year! Expatriates or emigres are using cell phones to transmit payment (remittance flow map) to relatives. Once received, relatives can purchase basic needs at their local stores with their phone credits.

**All data and stories from this post are excerpts from  Nicholas Sullivan's book You Can Hear Me Now: How Micro loans and Cell Phones Are Connecting the World's Poor to the Global Economy