With microfinance on the rise in developing countries, it is also driving developing countries to evolve. By supporting the most impoverished communities with a loan system rather than giving a donation without an obligation to make a return on their investment, the system stimulates the economy and helps bridge the widening wealth gap between the upper and lower class.
The Cell Phone Connection
So where do cell phones come in? Almost everywhere. As the Guardian describes, “Half of Africa’s one billion population has a mobile phone – and not just for talking. The power of telephony is forging a new enterprise culture, from banking to agriculture to healthcare.” To be a player in this economy, people need cell phones and technology to get their feet in the door.
In a Georgetown study, they found a correlation between cell phones and small business success. Aside from the wealth a cell phone represents in some areas, cell phones offer specific opportunities for entrepreneurs. Given these findings, a financer in Bangladesh created a system to help finance them for those who can’t afford them. “Grameen’s strategy is to assist clients who would like to obtain a cell phone in order to improve their business, which in turn will strengthen the social and economic development of their client base.” The strategy has been successful too. Many were skeptical whether or not the impoverished needed access to advanced forms of communication over basic necessities, but more than as a luxury, cell phones offer opportunity.
The Bigger Picture: Microfinance
These cell phone programs exemplify many of the misconceptions associated with microfinance. While people often underestimate the effectiveness of it, companies on the frontlines of microfinancing and loan programs prove that by providing for the lower economic tier, the money goes toward development just as often as means of survival like food and shelter. The Harvard Business Review says, “The lesson for multinationals: Don’t hesitate to deploy advanced technologies at the bottom of the pyramid while, or even before, deploying them in advanced countries.”
If you wonder why people are so optimistic about the spread of technology, it’s simply because advancing tech leads to advancement. As Sarah Stanley says, “Cell phones are now commonplace in poverty-stricken countries because of the work of dedicated entrepreneurs. Cell phones have also given many people the means to create wealth for themselves and their families.” Given the data, it seems irresponsible not to support microfinancing, because “Microfinancing coupled with mobile phone technology is providing countless opportunities for people living in poverty to better themselves and provide for their families.” By bettering their lives, we better our communities as a whole.