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Addressing Poverty Through Electronic Payments


Afghan men listen as a post office worker explains how to use their mobile phones at the Kabul post office. (file)
Over one third of the world’s population, some two and a half billion people, mostly in developing countries, have no access to the formal financial sector. In some countries, 80 percent of the population has no bank account, and therefore must subsist almost entirely in an informal, cash-based economy. This makes saving for the future, building assets or getting credit extremely difficult for them.


Although many of the poor have no access to banks, they do frequently own telephones. For example, while fewer than five percent of Afghans have bank accounts, 65 percent have mobile phones and 90 percent of the population lives in areas with mobile network coverage. So why not enable them to send and receive payments electronically?

That is the idea behind the “Better Than Cash” alliance, an initiative founded by the United States Agency for International Development, or USAID; the Bill & Melinda Gates Foundation; Citi Group; the Ford Foundation; Omidyar Network; U.N. Capital Development Fund; and Visa Inc.

The alliance helps governments, the development community and the private sector adopt the use of electronic payments, and also provides resources to those who commit to make the transition. For example, USAID plans to help developing countries transition from cash payments to electronic payments, with an emphasis on greater gender equality and financial inclusion.

According to USAID's Kay McGowan, "the U.S. is beginning to leverage its own economic footprint in Afghanistan by encouraging payments made through development programs and military contractors to shift away from cash to electronic and mobile payments. This ability to aggregate demand is a powerful tool the international community can use to help the sector grow."
Most recently, the government of Afghanistan committed to digitize their disbursements and payments. Afghanistan has much to gain from this move. Not only will electronic payments help create lasting benefits for the Afghan people by improving their chances of accessing formal financial services. Electronic disbursement will help cut down on robberies while improving transparency, security, and economic growth. As well, the World Bank found that governments can save up to 75 percent of costs by shifting to electronic payment programs.

“We commend Afghanistan on their leadership and commitment to empower people by transitioning to electronic payments,” said managing director of the Better Than Cash Alliance, Ruth Goodwin-Groen. “While the benefits of electronic payments are many, this shift requires resources and technical expertise and we look forward to providing this through our partnership with Afghanistan.”
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