Why cheaper money transfers help the poor

Marc Maxson – Saturday, May 23, 2009 – From Guatemala

Had a long day even through both flights were short by International standards. By 2pm Robert and I were in Antigua, Guatemala, a colorful town at the base of a volcano. We walked around for a while while we got acquainted with this new place. Our plan is to spend the week visiting GlobalGiving projects and facilitate two workshops at the end of the week about generating good media for the site. The people were quite friendly and the food great. You get the feeling that we’re not so far from home when every shop in town takes VISA and the ATM gives you the option of getting cash out in US dollars or Guatemalan Quetzals.

For my first item of business, I swapped out my SafariCom SIM card for a Claro one. Part of staff visits is testing out the pratical nuts and bolts of what makes GlobalGiving operate in over a hundred countries. We’d like to know what SMS tools work where so we can promote the cheap and easy-to-use ones for getting more “in the field” updates from travelers and organization staff. Ultimately, we like to hear from the people in the grass of every grassroots project that know best what they need and who is serving them. If you’re traveling, drop us a line and we’ll hook you up with a project to visit and the tools to help you share your story.

Robert and I found a corner telephone shop. I plopped down my African Nokia and asked for a SIM. The fella tried out various SIM cards until he found one that worked. Different networks use different frequencies, and apparently only one in Guatemala shares a bit of bandwidth with the one I used in Kenya back in March of 2009. $20 bucks later, I’m in business. Setting up twitter is taking a bit longer, partially because I needed to call someone to find out what my phone number was.

We wandered over to the park in the center of Antigua. I dropped into an ATM and withdrew $120 with a standard debit card from a small credit union based in Central Pennsylvania. The global financial network is amazing, and yet puzzling. It is great that a foreigner can use an ATM to suck $120 out of his US bank account for a $5 fee, but why does it cost our local NGOs between $20 and $50 to get money via a bank-to-bank transfers? Getting money to where it is needed most remains a huge challenge, but I that’s why I go into the field – to explore new technologies to drive costs down.

Why not just give our project leaders prepaid VISA cards, so they can pull the money out like I just did? (We’ve talked about it. The providers like iKobo are still too shaky in places like Sierra Leone and Somalia – where we need them most).

Another option is doing it over mobile phones. M-PESA, for example, allows Kenyans to transfer money directly from one phone to another. Last year some 15 to 18 million people transferred over a billion dollars within Kenya alone. The average transfer was $40 and it only cost them about 50 cents per transfer, according to a UNDP expert to spoke at a recent conference (Metrics from the Ground Up). Unfortunately there’s no bridge between M-PESA and US banks yet. But the potential for cheaper money transfers to make a material difference in the lives of three billion people that live on under $2.50 a day is obvious (http://www.globalissues.org/article/26/poverty-facts-and-stats).

Here is a good blog post about the global remittance economy:
http://whiteafrican.com/2008/02/08/the-20-billion-african-remittance-market/

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