Imagine waking up tomorrow to find that the value of every liquid asset you owned had been replaced by $1 bills. That credit card with the $500 limit? It just burst the seams of your wallet with 500 $1s. Your $30,000 retirement account? Good luck even finding your desk under that mountain of cash. But before you settle down in the study to count it out, you might want to lock the back door, because I wouldn’t put it past your neighbors to help themselves to a few handfuls of money. (After all, stealing cash is easier than cracking someone’s online bank account.) Financial management has a new and alarmingly literal twist in this world.
In fact, if you happened to live in Kinshasa, the capital of the Democratic Republic of the Congo, the above scenario would be a drearily familiar scene instead of an interesting thought experiment. Most formal financial services, such as savings, checking, and credit cards, are virtually non-existent in the DRC, and the largest bill in the local currency is the 500-franc note – worth about $0.55 at the time of writing. For the typical Congolese businessperson – say a woman selling cassava flour for 150 francs ($0.17) a cup at Makala market – a good day’s sales will mean quite the inconvenient pile of francs to carry around. The alternative is paying a price to convert those francs into American dollars, the DRC’s unofficial second currency, which come with higher denominations and lower inflation rates – and leave one a bit poorer as a result.
Despite the obvious hassle of dealing with mounds of tiny bills, however, it’s arguably not even the most serious problem posed by the DRC’s cash-only economy. When I was interviewing microfinance clients in Kinshasa earlier this year, what struck me most was the number of people who said they had cash stolen from them – whether in the street, in their homes, or even coming out of the microfinance bank with their newly received loan funds tied neatly into the corners of their pagnes, and clever thieves waiting to meet them. This is the hidden side of cash, the one that leaves the already-vulnerable poor more exposed to theft, and less able to conduct any type of financial transaction in privacy. And this is why, if the microfinance industry is genuinely committed to serving the poor, it needs to leave cash behind and embrace mobile banking.
In countries like the DRC, mobile microfinance may very well offer the first and only opportunity most people have to conduct financial transactions that are convenient, private, and safe – the types of transactions that have been taken for granted for decades in the West. The impact of this switch from cash to mobile really can’t be overstated. After all, where would you rather be – conveniently managing your bank account from your laptop or mobile phone, or standing guard over the $1 bills that make up your life’s savings, now stuffed under your (newly lumpy) mattress?
I thought so.
This post was contributed by Rachel Strohm, Sub-Saharan Africa Regional Coordinator for FrontlineSMS:Credit.
To contact Rachel, email
rachel@credit.frontlinesms.com.
