New Technology for Fighting Poverty
Building A Global Social Safety Net
I picked up such futurology not at an Internet trade show but at an Aspen Institute seminar on poverty, headed by Nelson Mandela and Jimmy Carter. The question participants were asking was this: can any of this whiz-bang Internet technology by used for alleviating poverty?
The answer is yes. "The Internet scales like no other technology," argues Allen Hammond, the senior scientist at the World Resources Institute. "One education Web site translated into Hindi, Mandarin, Swahili and Spanish would have a potential user base of two billion people. It can help even the poorest people invent their way out of poverty."
How so? Consider the Web site www.PlaNetfinance.org. The brainchild of a French banker, Jacques Attali, PlaNet Finance works like this: roughly 1.3 billion people live on a dollar a day. One thing we know is that one of the most effective tools for combating their poverty is micro-lending. Micro-loans range from $10 to $1,000. They go mostly to women and are given without any collateral. Micro-loan recipients use them to buy everything from sewing machines to cell phones the whole village can use, to beauty supplies to start a salon in a Bangladeshi slum. These people have the will to better themselves, they just don’t have the basic cash, and that’s what micro-loans provide.
While people who need micro-loans are not online today, many of the micro-banks and aid organizations that work with the poor do have computers and can get online. What PlaNet Finance is doing is wiring the 7,000 micro-finance groups around the world into a network that holds huge possibilities.
"First," says Mr. Attali, "PlaNet will connect as many micro-banks as possible so they can share solutions. Second, we will help those that are not online get online, as we did in Benin. Third, we are creating a system, like Moody’s that will rate micro-banks according to their ethics, how well they serve the poor and financial efficiency. Fourth, we are setting up a university online to teach best practices to micro-banks, and an online marketplace for micro-loan recipients to sell their crafts. Finally, we are creating PlaNet Bank, which will extend lines of credit to micro-banks and will enable anyone to come to our Web site, donate money to selected projects offered by the best micro-banks, and then track whom that money went to and how it is used."
If PlaNet can really rate and link all the micro-banks, it could help them lower their biggest cost – tracking and processing all these little loans. The idea is that a single micro-banker, armed with the sort of information device that FedEx uses to track your packages, could keep track of hundreds of loans and payments at a time. If the processing and transaction costs of these micro-loans can be reduced, they can be bundled together and sold on a commercial basis to the Citibanks of the world. Micro-banks usually charge 4 to 5 percent interest a month, so this market would appeal to big banks – if the processing costs were cut. And that would change everything, because right now there is great demand for micro-loans, but their cash pool is limited to donations. With $ 20 billion in commercial loans from big banks you could provide micro-loans to 100 million people living on $ 1 a day.
That’s how you change the world – get the big market players to do the right thing for the wrong reasons.
"There’s an old saying: ‘Feed a man a fish and you’ve fed him for a day. Teach a man to fish and you’ve fed him for a lifetime", says Mr. Attali. "Well, we have millions of poor people who know how to fish. They just don’t have a pole. Through PlaNet we might be able to get poles for a lot more of them."
By Thomas L. Friedman.