This is part two of a two-part series taking a look at important trends in finance-related mobile technology in the developing world.
On Tuesday, I discussed how mobile phones are improving access to banking and life insurance in the developing world, main points from a July 2012 World Politics Review article that I wrote with CFR research associate Ashley Harden called “Picking up the Slack: Mobile Technologies as Alternative Development Financing” (subscription required). Today, I’ll highlight how mobile technology enables NGOs to distribute aid and make loans in innovative ways—and to evaluate the effectiveness of their projects.
As we explain in the article, mobile technology, often in conjunction with the Internet, is revolutionizing the ways that the poor can receive cash transfers, loans, and critical resources. In the developed world, websites like Kickstarter, DonorsChoose, and FirstGiving help people crowd-source funding for creative projects, classrooms, and charitable causes. Similar technology is enabling non-profit organizations to raise and distribute funding to poor people in developing countries, often giving donors unprecedented discretion over and information about where their money is going.
Take Kopernik, for example. Launched in 2010, Kopernik is a nonprofit online marketplace for breakthrough technology for the world’s poor. As their founders describe, their goal is to be the “Amazon.com of technology for the developing world.” NGOs from developing countries list on the site their technology needs; donors (many of which are corporations) and individuals can search the website to decide what projects to fund and later receive feedback on the impact of their donations. Increasingly, real-time data is collected via cell phone from the technology users. As of April 2012, Kopernik’s 46 projects in the developing world have reached some 74,000 people.
Using the Internet and mobile payment systems, the nonprofit Zidisha is an online platform through which entrepreneurs in the developing world (mostly in Kenya and Senegal) can obtain business loans from donors (mostly in developed countries). Zidisha’s peer-to-peer microlending model is the first of its kind: lenders interact directly with entrepreneurs and decide how much of a project to fund and at what interest rate. Accepted loans are transferred straight to entrepreneurs via mobile banking services, eliminating the transparency and accountability issues that often come along with using middlemen. To date, Zidisha has financed almost 500 businesses and raised over a quarter of a million dollars; the organization boasts a repayment rate of 98 percent.
When it comes to distributing aid to the poor, non-profits and governments are also making use of mobile payment systems. A Kenya-based non-profit, GiveDirectly, uses mobile money to transfer donations directly to needy recipients in Kenya (for a more detailed discussion of the rationale behind and success of direct cash transfers, please see my blog post about GiveDirectly from earlier this year). Although GiveDirectly was founded as recently as 2008, it has already disbursed $600,000 in donations, allowing families to meet basic needs and to make long-term investments in their wellbeing.
In Afghanistan, USAID has begun to pay the salaries of Afghan civil servants through mobile payments systems instead of in cash. This new policy has reduced corruption in a way that benefits rank-and-file civil servants: Afghan police officers paid via cell phone through a USAID-facilitated program at first thought they had been given a 30 percent raise when, in fact, it was just the elimination of theft by corrupt officials.
Of course, the most important question for any development effort is effectiveness. In a climate of increasing budget constraints, data collected inexpensively through mobile phones is helping to improve development outcomes. For example, GiveDirectly uses text messaging to understand the effectiveness of its cash transfers. The feedback collected also provides valuable information about the financial decisions of the poor. In the case of Kopernik, beneficiaries provide feedback through the Internet about the ease and reliability of the donated technology, and increasingly, they are doing this through their phones. Product reviews are posted online so that other technology-seekers have more information about what to buy and project failures can be minimized. Kopernik is currently working to design a mobile application that can be widely used (even by people who might not have basic literacy or technical literacy) to collect feedback on their programs. The spread of data collection on mobile phones has the potential to significantly increase the accountability and responsiveness of governments and NGOs providing services to the poor.