Starved of cash, half of India awaits a mobile money revolution

A service like Vodafone's M-Pesa could transform lives for India's unbanked.
Written by Rajiv Rao, Contributing Writer on

In most parts of urban India today, getting an ATM to spit out cash or transferring money through your online account is an afterthought. In rural India, it's a luxury.

Only an estimated 30,000 of the 600,000 villages in the country have bank branches. This translates to around 700 million people — over 60 percent of its population of 1.2 billion people — with mobile phones, but no bank accounts, which is a catastrophe when it comes to the rural poor being able to receive payments or pay for basic goods and services.

Another calamitous by-product of not having a payment system for the poor: Middlemen being able to easily siphon off payments given to them for work completed through the public works projects like NREGA.

So, when telecom giant Vodafone announced that it was finally expanding its "M-Pesa" mobile cash transfer service to the rest of India after test driving it in a few select states, many have regarded it as a long-overdue and welcome development. It may just trigger a domino effect in making things easier and more available to the cash-starved rural poor.

M-Pesa is of course legendary in Africa — specifically Kenya, where it was founded by Vodafone in association with telecom provider Safaricom, which dominates two thirds of the market. The system works like this: You give cash to one of the telco's 40,000 agents, who could have a little store selling mobile recharges, for instance. He or she then credits the money to your M-Pesa account. You can withdraw that money from another agent or transfer it to others using your phone.

For a country with a large rural population that receives money from urban relatives, or for Indians working in the Gulf who wish to wire money back home in an uncomplicated manner, this system is a boon. It can also make people more productive: One study found that rural Kenyan households that adopted M-Pesa found a 5 percent to 30 percent increase in their incomes.

If the Indian mobile banking experiment is anything like the one in Kenya, it could bring in a sea change in the way people live in the Indian hinterland.

That said, is Vodafone's M-Pesa truly positioned to offer transformational change here? Or is India a very different cup of tea requiring a different kind of solution entirely?

Stay tuned for a follow-up story that explores this.


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