NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, February 4, 2015

The focus of the media attention during the president’s visit was the historic invitation to be the honored guest at India’s Republic Day — a first for the U.S. and a signal of the close and evolving relationship between the two countries. However, what got little notice was something the president left behind, something that will likely contribute to the biggest transformation for the poor in India.

India is a study in contrasts — deeply spiritual yet stubbornly segregated. It rightfully celebrates one of the fastest-growing middle classes in the world. Still home to 200 million people living in unimaginable poverty and 500 million more not that much better off, there is much that can be done.

Roughly half of Indian households have access to a bank account, and 73 percent of the farmers have no formal credit, robbing them of their ability to invest and build a food-secure future for their family and the rest of the country. The new Premier Modi is laser-focused on changing this reality. He made a pledge to get every single one of the 1.2 billion people living in India bank accounts — an important step toward prosperity.

Mobile phones are the key.

Almost all Indians own or have access to a phone, including 80 percent of those living at the bottom of the pyramid. If they could use their phones like we use our debit and credit cards, millions of poor Indians could have the tools to become less hungry and more prosperous. Obama and Modi announced an innovative partnership with USAID and the private sector to accept mobile money for purchases and to use it to distribute payments for goods or wages throughout India. Getting private companies to accept mobile money for purchases is huge and an essential part of creating a digital financial system.

There are three things that are needed for mobile money to work:

1. Regulators need to allow people to store money, access bank accounts and buy things using their phone.