Transforming Access to Finance in Developing Countries Through Mobile Phones: Creating an Enabling Policy Framework
Technology, and in particular the spread of real-time communications networks, permits banks to delegate last mile cash management and customer servicing functions to third-party retail outlets. By making basic deposit, withdrawal, and payment functions available securely through retail shops that exist in every village and neighborhood, there is an opportunity to dramatically increase the physical footprint of banks and to transform the basic economics of low-balance savings. Banking regulations need to be adapted to these new possibilities of banking beyond bank branches. We highlight three specific areas where sharpened regulatory analysis would help strike a better balance between maximizing the opportunities of these models and containing risks.
Understanding how capital flows within rural communities in sub-Saharan Africa can provide important insights on the nature of poverty and the effectiveness of financial intermediation interventions. In this paper, we use unique individual level savings and borrowing data to study the flow of funds within a sample of 104 Ugandan savings groups. We show that poor households borrow from wealthier households, which implies that the marginal benefit of money is decreasing in wealth. The result suggests that savings groups are effective at channeling funds to their poorest members.