Thursday, October 25, 2012
Micro-lending, Telephone Banking and M-Pesa For Minimalists
In a part of the world hardly known for its economic innovations, a revolution in finance offers a concept that is a brilliant solution for North Americans: M-Pesa.
M-Pesa is a cellular-telephone money-handling idea that allows Kenyans to store money on their cell phones, transfer the money across the country, and avoid costly bank fees in the process. It is a concept that provides a real stimulus for commerce and micro-business development.
In other parts of Africa, another innovation – micro-lending – offers a platform on which budding entrepreneurs with creative ideas and a commitment to success can build micro- and extremely small businesses through funding sources that may provide as little as $20 for a business start-up. Yet, this supposedly pathetic funding model has resulted in financial independence and freedom from abject poverty for thousands of Africans without access to conventional financing.
Ironically, both concepts would work in western economies, but have been eschewed, largely because they lack the glamour, polish and complexity of conventional business models held out as being the most efficient in our North American markets. Particularly, both schemes are adaptable for those of us who embrace the minimalistic mantra for living: simple is better. M-Pesa’s equivalent – telephone banking – has been usurped by the domestic financial community in North America, with, aside from PayPal, the only significant cellular banking formats being conducted through one’s existing banking institutions or credit card providers.
M-Pesa has grown beyond Kenya, to countries like South Africa and Tanzania, where geography and weak banking infrastructure make access to finances difficult. The concept, though, allows for users to hold money on their phones, then attend at any of myriad kiosks in these countries, where they are able to obtain actual cash to make purchases or pay bills where cellular funds would not be accepted. This component of M-Pesa overlaps into conventional North American debit systems.
Micro-lending, like M-Pesa, has grown out of the unique, impoverished demands of Africa. As an option to no funding whatever, or worse, loan sharks, workers can borrow money from a non-profit micro-lender to establish a very localized business, obtain raw materials or inventory or expand an existing cottage micro-business. A mere $20 loan can provide economic stability that will enable an undertaking, otherwise doomed to failure, to flourish.
Again, like M-Pesa, micro-lending is a concept that would work well in North American systems, if not for our myopic belief that “big” is the only way and that any lending needs the financial skirt and blouse of respectability and perception of quality. In fact, micro-lending on a community basis may be nothing more complex than a bartering system, using cash instead of goods. Micro-lending can take place, based on faith and the security of future product and/or service.
Since conventional capitalism seems to be reluctant to embrace something so base as an M-Pesa or micro-lending network, the opportunity exists for those of us who embrace simplicity. Networks of money exchanges could be set up, with little difficulty and no risk to lenders, but using only one centrally managed bank account and a team of volunteer overseers. The equivalent to M-Pesa similarly could flourish, using a combination of barter and social network tenets, at almost no cost to the participants. Yet, established financial institutions would, most likely, seek to block such initiatives, ostensibly because it would be perceived as risky for individuals, but, in actuality, to protect the institutional lenders’ territory.
Such a concept – discarding establishment corporate power – probably would be welcomed enthusiastically by such fringe groups as survivalist and anti-government bodies, and, in turn, be viewed suspiciously by those of us who may be more mainstream. This should not keep us from, at least, exploring the potential in these viable ideas. All that we require is a willingness to be open to the proposal, and identification of individuals or groups willing to take the lead in setting up M-Pesa and Micro-lending for Americans. Are you one such person?