Around one billion people have no access to the financial system because they are simply too poor. These are the people in extreme poverty, defined as those earning under $1.25 a day by the World Bank.
But even in a world of such poverty, mobile phones are commonplace. Around two-thirds of Africa’s population has a mobile phone and yet less than a quarter have a bank account with a traditional bank.
The world’s very poorest are therefore excluded from everyday financial relationships, cannot get loans outside of those available from money lenders and their extreme poverty can put them below the visibility threshold within their communities.
Microfinance may make a difference. Microfinance is the extension of small loans to the very poor, in combination with other financial services, such as savings facilities, training, health services, networking, and peer support.
Microfinance in Africa
It’s possible that Orange’s latest solution, Orange Collecte (introduced initially in Ivory Coast in partnership with HelloAsso) may help such excluded individuals access finance. The service is Africa’s first-ever mobile crowdfunding platform for individuals and charitable groups. People seeking finance from friends, family or the community, can request it through the mobile network, receiving donations via Orange Money.
The service means a subsistence farmer working in the hills near Yamoussoukro might be able to use the service to raise a few dollars to purchase seeds, paying the money back once the crops are grown, freeing these farmers from the scourge of borrowing on financial black markets.
These moves make it possible for the very poor to raise funds not just from the communities surrounding them, but also from the wider extended communities they are connected with.
You see similar solutions elsewhere: In Kenya, M-Changa is already established as a mobile-based crowdfunding platform. Kenya is culturally interesting in that it has a deeply engrained culture of giving, adults participate in at least 5 occasions of coming together for a cause per year, this is called ‘Harambee’. M-Changa provides a cheap method of collecting funds through mobile money which enables Kenyan’s across the country and abroad to contribute to campaigns.
And in India, 42 companies were recently given permission to launch India’s first payments banks, which can take deposits and provide remittance and payment services, but not make loans. These banks will make it possible for millions across India to open bank accounts, enabling them to connect with new classes of service and support.
In a sense the system used is less important than the impact of enabling financial inclusion for the world’s poorest. A Center for Financial Inclusion blog post explains these excluded groups, “may have financial needs that do not fit the typical cash flows of other clients.”
For example, rural farmers in northern Bangladesh needed schemes that combined loans and savings in sync with the growing season, enabling them to survive the lean periods while having a secure place to save during harvests.
The Microcredit Campaign believes such microfinance programs show that these very poor people are a good risk, not only do they achieve strong repayment records because of the peer-to-peer elements of such crowdfunding microcredit attempts, but borrowers support each other to ensure mutual success. Microfinance solutions like these may enable the world’s very poorest to work to end their own poverty in dignity.
Orange Money was used to transfer more than €4.5 million (US$5. million) last year. The new service is open to all Orange Money customers in Ivory Coast and contributors need its electronic wallet to be able to make their donations. At the end of each campaign collection, the amount raised is directly transferred to the user's Orange Money account.
Jon Evans is a highly experienced technology journalist and editor. He has been writing for a living since 1994. These days you might read his daily regular Computerworld AppleHolic and opinion columns. Jon is also technology editor for men's interest magazine, Calibre Quarterly, and news editor for MacFormat magazine, which is the biggest UK Mac title. He's really interested in the impact of technology on the creative spark at the heart of the human experience. In 2010 he won an American Society of Business Publication Editors (Azbee) Award for his work at Computerworld.