Select your localized edition:

Close ×

More Ways to Connect

Discover one of our 28 local entrepreneurial communities »

Be the first to know as we launch in new countries and markets around the globe.

Interested in bringing MIT Technology Review to your local market?

MIT Technology ReviewMIT Technology Review - logo


Unsupported browser: Your browser does not meet modern web standards. See how it scores »

{ action.text }

In Bangalore’s Avalahalli neighborhood, a bank account and microloans have transformed the life of 32-year-old Sabira Khanam. Her first loan, of 10,000 rupees (about $200), allowed her to experiment with a small-scale kerosene distributorship. A second, smaller infusion financed her sister’s wedding. A third, of 20,000 rupees, launched a business sewing sequined saris for sale to local women. Khanam, who lives alone and has disabilities stemming from childhood polio, is now able to rent a large masonry house. And she got the cash to do this without resorting to local loan sharks, who charge 2 to 10 percent monthly interest for long-term loans–and much more for small, short-term loans.

But more than half of India’s 1.1 billion people lack access to the kinds of financial services that made such a difference for Khanam. “In most of the developing world–and that means most of the world–the people that are ‘unbanked,’ or very badly banked, represent 70 percent of the population,” says Michael Chu, a Harvard Business School lecturer and an expert on microfinance, which extends basic banking services to poor people who have not been served by the traditional financial system. “Literally, you are talking about 4 billion of the 6.5 billion people in the world. We are just beginning to penetrate that.” And despite the well-­understood potential of microlending to help lift people out of poverty, it currently reaches fewer than 200 million people worldwide. ­(A 2007 estimate put the figure as low as 133 million.) Micro­finance “has been progressing at a very fast rate,” Chu says. “But if you look at it in terms of how many people [enjoy the benefits], we are just beginning.”

A peek at the administrative tasks associated with Khanam’s loans helps explain why. A representative from Grameen Koota, the microfinance institution that lent to Khanam, must attend weekly meetings at her house to accept repayments. (Khanam leads a group that includes nine other borrowers, all of them women, who have financed everything from down payments on motorized rickshaws to materials for incense manufacture.) To service its 160,000 borrowers, Grameen Koota maintains a staff of 600, most of them loan officers from 52 branches who must attend 5,000 such meetings each week. Beyond the heavy workload, the risk of robbery, embezzlement, or fraud plagues the process. “Today, every one of my loan officers is carrying about 50,000 to 100,000 rupees to these meetings,” says Suresh Krishna, Grameen Koota’s managing director. “He is going 20 kilometers, collecting repayments, and bringing it back. We are carrying so much cash. We are prone to thefts, frauds, robberies, and misuses of this money. In one incident, one of my fellows was robbed; five people stopped him, showed knives, and snatched away 33,000 rupees.”

While visiting Khanam’s house and listening to her story over a glass of orange soda (and over the tinny strains of the prayer calls from the nearby mosque), I noticed that she owned a cell phone. It was a simple Nokia 1100, the low-end stalwart of developing-world communications; she purchased it last year after concluding that the business value justified the investment of 3,000 rupees (roughly the retail cost of six of her saris). Her prepaid plan allows outgoing calls for about half a rupee (less than two cents) per minute. One of her communication strate­gies is to note the phone number of an incoming call but not answer the phone. It’s a common trick throughout the developing world; in this manner, people can convey mutually understood messages, such as “Let’s meet.”


4 comments. Share your thoughts »

Credits: Michael Rubenstein, Tommy McCall, David Talbot

Tagged: Business, Communications, software, mobile, cell phones, India, mobile banking, e-banking, microfinance

Reprints and Permissions | Send feedback to the editor

From the Archives


Introducing MIT Technology Review Insider.

Already a Magazine subscriber?

You're automatically an Insider. It's easy to activate or upgrade your account.

Activate Your Account

Become an Insider

It's the new way to subscribe. Get even more of the tech news, research, and discoveries you crave.

Sign Up

Learn More

Find out why MIT Technology Review Insider is for you and explore your options.

Show Me