Economic Apartheid?


Living not too far from me is a young Rastafarian named Isaiah (affectionately known as Ras I) who works as an occasional carpenter and joiner. His real passion, though, is sculpturing and other forms of art and craft, including basketry. He sells his creations primarily to tourists. Two months ago he opened a savings account at a local credit union after trying unsuccessfully to start one at a bank in the city centre. Like most people in St Lucia who apply to open savings accounts at banks, he was asked to provide a letter of employment, his passport and national ID, and copies of two utility bills bearing his name.  He was also required to fill out a lengthy application form providing, among other things, details about his monthly salary and disclosure of whether he was involved any form of illegal activities, including terrorism.

The problem is Ras I does not have a steady job so he couldn’t get an employment letter. He lives in a rented house but the utility accounts are not in his name.  Nevertheless, he’s adamant that he needs to have a bank account and access to other banking services such as a credit card so he can shop online for good deals on materials and equipment he uses in his craft work. He also wants to create an online store to sell his work to customers outside of the local tourism market. He even believes that an online art-and-craft store as he envisions it could create opportunities for other local artistes to sell their work to internet shoppers. He feels very strongly about it.

“The credit union is good but it does not me give the kind of financial flexibility I need. I have some good contacts in Miami and the UK who’re willing to help with marketing but first I need to get the online business up and running,” says Ras.   

By contrast, another young man named Paul who lives a quarter mile away in a suburban area returned home 12 months ago from studying economics and got employed with an upscale firm. He’s now thriving. He had no problems opening a bank account and to the extent that he’s able to afford them, he has free access to the various banking services. Paul is part of the burgeoning upper-middle-class who has easy access to a host of banking services, including credit and debit cards, current accounts and mortgage loans.  He has no trouble buying goods from online stores like Amazon or E-bay. If his credit cards are turned down by the stores (as sometimes happens if the card holders are not based in the USA) or they don’t ship merchandise outside of the US, he has other options. He can utilise Paypal for payments, or use companies like or Shipito that offer package and mail-forwarding services and access to US mailboxes and telephone numbers.        

The two men are not strangers to each other. Paul has bought a couple of small sculptures from Ras I. But unlike Paul, Ras and many others aren’t able to access the sort of banking services that professionals like Paul take for granted. The two men live a 15-minutes drive away from of each other yet inhabit separate worlds, divided by access to cash and credit.  

Paul has a number of friends who have hardly ever done a legitimate day’s work in their lives yet they live in upscale neighbourhoods and can afford fast, expensive cars and furnished homes built on laundered cash and the infamous white powder. But he is keeping his distance. He insists he wants to get ahead in life by legal means.   

His plight was brought to mind by one of Caribbean Book Blog’s readers who made an insightful comment on my earlier piece “The Caribbean Faces an IT Revolution.” It dealt with the recent launch of BookServer, an open platform designed to allow publishers, booksellers, libraries, and authors to make their books available directly to readers through their laptops, phones and dedicated reading devices

“I can’t help thinking that this is likely to make things rather worse for readers in the Caribbean. Although there are a growing number of internet users, how will the majority of people pay for these services? There are a lot of people who do not have credit cards, Paypal etc. Will these people be excluded from taking advantage of these new services?” noted Jamaican writer Claudette Beckford-Brady and her observation is correct.    

As luck would have it, there are developments looming on the horizon which may offer a solution – one that has the potential to transform the economies of the Caribbean and other developing states. It’s mobile money transfers (one of the inherent features of mobile banking) and in the countries of East Africa where it has taken root, the economic impact has been phenomenal, all because of its convenience and ability to tap the un-banked population.african-people-mobile-phone

Fundamo, one of the companies piloting the mobile banking revolution in Africa, markets solutions and supporting services  that enable person-to-person payments, payments for deliveries, airtime purchases, bill payments, retail payments and payments for virtual content through mobile phones. Currently they operate in South Africa, Kenya, Botswana, Zimbabwe, Zambia and the Democratic Republic of Congo (DRC).

Celpay, another company involved in the mobile banking business, is a mobile payment facilitator operating in Zambia and the DRC. They offer mobile phone-based virtual bank accounts with advanced features similar to many normal bank accounts that facilitate account transfers, bill payments, cash deposits and withdrawals and prepaid airtime vending, all supported with real-time clearing.

“Africa is a cash-based society, and while the Western world views m-banking as almost exclusively about credit card transactions, African companies are proving that it can better be used as a tool to facilitate virtually any form of payment directly from a mobile phone,” says Hannes van Rensburg, CEO at Fundamo. “To people unable to always make it to the nearest town or transaction point at the drop of a hat, m-banking offers banking to virtually all.” 

There are plans among the telecom operators involved in the mobile money-transfer business in East Africa to develop a regional platform to increase the efficiency of the service, especially if the East African Common Market takes shape.

Chief Technology Officer of the communications software company Redknee Solutions Inc., Bohdan Zabawskyj is a strong proponent of mobile banking. In his article “The Mobile Money Opportunity” on the Redknee website… Zabawskyj said:

“People in emerging economies can easily interact, collaborate and exchange money because they have access to mobile networks and handsets that are declining in cost. Recognizing the growth of migrant worker populations at all levels of the economy, service providers are introducing new packaged micro-banking offerings for workers, family members and entrepreneurs. These offerings can provide users with the same financial services found in urban banks.”

He says that because mobile banking offers a variety of valuable financial transaction capabilities, it is ideal for developing market economies. “Because it generally operates on a credit or pre-paid basis, bad debt is not an issue. It can be augmented further with links to financial institutions to facilitate funds transfer to and from traditional non-mobile accounts, as well as to merchants for purchasing digital or physical goods.”

CGAP is an independent policy and research centre dedicated to advancing financial access for the world’s poor. They too recommend mobile banking as one of the means of addressing the perennial problem of inaccessibility to banking services suffered by the economically disadvantaged in poor and developing countries. 

In an article entitled “Mobile Banking for the Unbanked: CGAP” the telecommunications website Developing Telecoms reports that CGAP “has been releasing new research and data to encourage telecom operators, financial institutions and governments to see the business potential in expanding access to financial services for poor people in developing markets … CGAP estimates that 150 million poor people around the world receive regular social welfare payments from their governments. Yet fewer than 25% of beneficiaries receive their benefits into a bank account through which they could save, make payments and build assets.”  

Mobile banking has also come to the Caribbean. Telecommunications operator Lime, a subsidiary of the British-based company Cable & Wireless, has partnered with ECIC Holdings, a private company owned by 10 Caribbean-based banks, to launch a mobile banking service in Antigua & Barbuda, Dominica, St. Kitts & Nevis, St. Lucia and Turks and Caicos. For now, the service allows consumers to use their mobile phones to view their account balances and transaction history, pay bills, and receive alerts and information. Funds transfers are available via the phones’ WAP/internet browser.  However, the general consensus among financial and telecommunications experts is that mobile  banking can be made more flexible to allow for transactions that do not require initial access to tools like credit and debit cards, or even bank accounts, to make and receive payments.

In the meantime, the ACP Group of States and the European Commission are embarking on a study to explore the legislative and regulatory environment in Europe related to the establishment of mobile and other types of money transfers between Europe and the Caribbean. Thirty stakeholders from the OECS region were among those who attended a workshop held on April 7 – 8, 2009 aimed at building a common understanding of the issues to be addressed and ensure close alignment in terms of expectations, outputs and methodology.

For ambitious youths like Ras I, the global push to make money transfers and mobile banking services more accessible is like a light shining on a hill in the dark. Although the way forward is still not quite clear, there is that glimmer of hope.

On the heels of these developments, the Inter-American Development Bank and Microsoft on October 13 agreed to extend their joint investment in projects that promote the sustainable social and economic advancement of countries in Latin America and the Caribbean.

The two institutions want to make it easier for small and medium-size companies and related financial intermediaries to access technology solutions and skills that would help to make them more competitive. They say they also want to facilitate the development of technology and innovation research and promote projects that would encourage people to make better use of technology in education. Their hope is that this would help to reduce the digital divide, particularly among rural and low-income youth. (Search:Microsoft And The IDB Extend Joint Projects In Latin America And Caribbean)

These are all hopeful signs. It remains to be seen where it all leads. For what it’s worth, Ras I’s ambitions make you wonder whether the time has come for the initiation of programs to encourage young and not-so-young would-be entrepreneurs in the Caribbean to explore the possibilities of launching online ventures rather than focusing predominantly on traditional brick-and-mortar businesses that target the local, or at best, regional market. Likewise, would-be writers and publishing houses from the region may want to consider those options.  

The trick in it, though, is that for the whole thing to come together the Caribbean governments need to get their act together and provide the enabling environment, and the financial and telecom sectors must position themselves to take advantage of these opportunities. That is the catch.  

4 responses to “Economic Apartheid?

  1. Tony, once again a very well researched and informative post. I am encouraged by the possibilities of the mobile money transfer which will potentially open up the internet market to many in the Caribbean. I guess it is up to us to pester and bombard our governments and mobile providers in order to encourage them to bring these facilities to us.

  2. Thanks for referencing me in your very informative and well-written article. I would love to meet you.

  3. Hi, found your blog through wordpress. We in India are also trying out several mobile banking models although none have picked up real traction so far.

  4. There is a massive change underway in the mobile media market as it becomes unshackled from the operators’ portals that have dominated it for a decade, all without having made any significant inroads into the content use of mobile users. The new capped data packages, fuelled by further competition, will see a total revamp of the mobile media market. It will no longer be based on portals but on direct services by content and services providers via open source phones and mobile-friendly Internet-based services. The next step is the continued emergence of m-commerce and in particular m-payment services.

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