The article is titled:
How to manage all your financial affairs from a $20 mobile phone.
One of Jeffrey Sachs measures for the success of his anti poverty effort called Millennium Villages, is the use of cell phones. Turns out, cell phone usage is going up everywhere, with or without the Millennium Village investment. My good friend out on the Serengeti has a smart phone - an iPhone! His neighbors generally use a much cheaper variety. You can buy one at Walgreens for $20 - it is my only cell phone!
You need to know that there is NO electrical service yet on the Serengeti! The cell phone companies have towers and generators out there. The customers use solar chargers - either one they own, or one a neighbor lets them use for a price! Why the push for cell phones in such a poor area? Well, think about it. You are a Masai herdsman, and you want to make a deal for some cattle, or some corn. The nearest market is, say, a day's walk away. One day you discover that you can use a cell phone to talk to the seller, or buyer, and actually close the deal, in less than a minute. You can negotiate the price, and actually MOVE the money. Using a very simple cell phone with some text capability.
As the article points out, Tanzania has some of the most sophisticated systems in the world for moving money via cell phone. In the US, just try moving money from one bank to another person's account in a different bank with your cell phone. Or try moving it across a national border. I can't do it using the WWW without major problems and fees. And I know how to use PayPal! See this piece: NY Times - Hard To Send Money to Friends
And yet this same approach is NOT working in India, a much more developed part of the world. See this piece: Why Mobile Money has failed to take off in India. Turns out it is the regulators and banks that are inhibiting things. It seems the banks are focused on making money, not encouraging development. If it hurts them, they are agin it. Imagine that!
Darn that big government. Another key factor for development is a governmental structure that actually supports it. That does not mean NO government, it means one positive to development. A simplistic approach to NO government gives you Somalia. Not a place economic development is flourishing.
One of the key ingredients for development is a stable, trustworthy business system. Carrying $100 from here to there in Tanzania is not without some risks. Carrying $10,000 has a LOT of risks.
Two other key ingredients for development are credit and savings. If your only means for saving money is to hide it under your bed - you are at considerable risk. If you have to PAY the bank to open a savings account, and the bank is 2 hours away - guess what happens to savings.
In most developing countries, there is also no such thing as a credit bureau, or a credit rating. If you want to make a major purchase on time in Esteli, Nicaragua, the local merchants have a cooperative reporting scheme. They check with each other as to whether or not you have an outstanding payment with any one else, and how you made those payments. A credit system at a very local level.
Banks do not lend money to people who have NO money. That is not how the system works. That's why micro credit works. It is a type of forced savings account, that provides some form of credit. The average micro credit loan rate around the world is 27%. It's true. (http://www.cgap.org/) I can walk down to my local bank here and get a line of credit for 3.99%. That 23% is a considerable drag on economic development and risk taking.
As I have stated here before, the real root of our economic disparities lies in our world view. But there are many mechanisms we can use to help change that world view. Putting someone in charge of their own finances, giving them easy access to real credit, enabling financial transactions all help do that.
I am persuaded there is no magic bullet to solve the wealth disparity, and we just have to keep doing the hundred little things that work. When Tanzanians can get a bit more efficient and effective, we all benefit. I have more hope for sub Saharan Africa than all of the middle east. They are so buried in their religious oligarchy and sectarianism that they are just going to keep killing each other for the foreseeable. It actually works better if there are so many different tribes or groups that no one group can dominate. They have to work together - or NOT!
Remember, we're all in the together, and I'm pulling for you.
As I have stated here before, the real root of our economic disparities lies in our world view. But there are many mechanisms we can use to help change that world view. Putting someone in charge of their own finances, giving them easy access to real credit, enabling financial transactions all help do that.
I am persuaded there is no magic bullet to solve the wealth disparity, and we just have to keep doing the hundred little things that work. When Tanzanians can get a bit more efficient and effective, we all benefit. I have more hope for sub Saharan Africa than all of the middle east. They are so buried in their religious oligarchy and sectarianism that they are just going to keep killing each other for the foreseeable. It actually works better if there are so many different tribes or groups that no one group can dominate. They have to work together - or NOT!
Remember, we're all in the together, and I'm pulling for you.
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