Gates Foundation Pledges $500 Million to Give Poor Bank Access
The Bill & Melinda Gates Foundation pledged $500 million over five years to help poor people get savings accounts, its biggest commitment yet to improving access to financial services.
The pledge will let millions of people who live on $2 or less a day use their mobile phones or visit a local store to deposit money, the Seattle-based foundation said today in a statement. Of the total, $40 million in grants were announced to get programs under way.
The project, with partners including BRAC Bank Ltd. in Bangladesh and Vodacom Tanzania Ltd., is intended to build on the success of Safaricom Ltd.’s M-PESA mobile money system in Kenya, foundation officials said. That service began in 2007 and had more than 13 million subscribers at the end of September.
“The big challenge you see over and over again with banks is that the small-balance accounts are not profitable,” said Bob Christen, director of the foundation’s financial services for the poor program. “Also, not very many bank branches are located where the poor live and work.”
As a result, someone in Bangladesh might spend half a day’s wages getting to the bank, Christen said. As an alternative, the poor often put cash in jewelry or livestock vulnerable to theft or loss. Studies show people using M-PESA in Kenya are better able to withstand shocks like crop failure, he said.
“Mobile banking has the potential to radically redraw the cost equation,” said Jonathan Morduch, a professor of public policy and economics at New York University who is co-author of the 2009 book “Portfolios of the Poor: How the World’s Poor Live on $2 a Day,” which examined the budgets of 250 families.
The foundation, run by Microsoft Corp. Chairman Bill Gates and his wife, Melinda French Gates, had $36.4 billion in assets at the end of September and has focused on public health and education. Since 2006, the foundation had also committed $530 million to financial services for the poor.
The package of grants announced today included $10 million to bring 17.5 million poor people into bKash, a mobile money system in Bangladesh, and $4.8 million to expand the usage of M- PESA in Tanzania by at least 2 million people.
To contact the editor responsible for this story: John McCorry in New York at firstname.lastname@example.org.