Banking the Unbanked: Issues in Designing Technology to Deliver Financial Services to the Poor

The goals of economic development in many countries are unlikely to be realised while 1.7 billion working adults make less than US$2 a day1 and have little or no access to basic financial services. The history of financial systems such as in the United States shows that citizens’ access to capital and convenient savings services are key underpinnings of economic growth. Yet between 70 and 80% of the world’s population has no access to even the most basic financial services. Over the last 30 years, the microfinance industry has proved that the extreme poor are bankable. Not only do they repay loans, but they do so with very low defaults and relatively high interest rates. Microfinance institutions (MFIs) have become commercially viable enterprises. Yet the microfinance industry as a whole has not been able to grow fast enough to meet demand. At the same time, banks and entrepreneurs in developing countries are beginning to realise that there is a viable market for financial products among the world’s vast unbanked masses. How can microfinance have macro impact such that billions of today’s urban and rural poor gain access to financial services? This is the question that a consortium of public and private sector partners convened by the Hewlett-Packard Company (HP) asked themselves. With financial support from the United States Agency for International Development (USAID) and HP, this consortium engaged in three pilot projects in Uganda to determine the role technology could play in increasing the reach of microfinance.