Smart money for India?s rural poor

Friday, August 17, 2007

India?s Finance Ministry and Planning Commission are looking into ways of using electronic smart cards to transform the distribution of relatively small amounts of government money to India?s 220 million people who live below the poverty line, and maybe to 200-300 million more who are only marginally better off. This would make it much more difficult for bureaucrats, politicians and middlemen to siphon off the funds as they move down the distribution chain.

?We already have the technology today to do this and it would be feasible to use it for putting money in the pockets of the rural poor within 18 to 24 months,? K.V.Kamath, managing director of ICICI Bank, a leading Indian financial institution, said in Delhi last week.

The Smart card system would not have been possible a few years ago because there was not sufficient telecom connectivity. But India now has 190 million cell phone users – rising by more than six million a month – plus 40 million fixed lines. This increased connectivity to remote areas opens up various possibilities for smart card use.

In a parallel technological development, ICICI is introducing biometric smart cards that enable people to identify themselves by their thumbprints at ATM and other terminals. It expects to have 220,000 cards in use by next March (justifying a claim Kamath sometimes makes about ICICI really being a technology company that?s into banking).

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Source: Fortune (link opens in a new window)