The Economist | Mobile financial services are cornering the market

Mobile money means more nimble financial services


KAUSAR PARVEEN, of Chakwal district in the north of Pakistan’s Punjab province, is a star beneficiary of the work of Karandaaz, a Pakistani financial-inclusion charity. The owner of just one buffalo, she borrowed 75,000 rupees (about $650) to buy another one and started selling milk. The business has done so well she now has four buffaloes and an assistant, and has taken out another loan to install a biogas plant, saving on firewood and sparing her family the woodsmoke.

This was how microcredit, as promoted by Muhammad Yunus, a Nobel-prizewinning entrepreneur from Bangladesh who launched his Grameen bank in 1983, was supposed to work: credit would allow the poor to establish microbusinesses and improve their lives. The idea has spread across the developing world. Sadly, in many places it has not worked out that way. A big expansion of microcredit in India’s Andhra Pradesh province caused a crisis in 2010 when the lenders were blamed for an increase in suicides by farmers. A World Bank paper last November, written by Robert Cull of the bank and Jonathan Morduch of New York University, considered evidence showing that microcredit has had “only modest average impacts on customers”. It has often been used to cover the normal ups and downs of household spending, which is helpful but not transformative. Read full article.