In The State We're In, we always look at the right to... something. Sometimes it's dramatic and shocking, like the right not to be tortured, sometimes it's a less serious topic, like the right to sex. This week it's the unassuming right to banking services.
This may not seem earth shattering to those of you who have bank accounts. But access to a bank account and other financial services such as loans and mortgages can make the difference between poverty and prosperity. It does, in fact, ‘take money to make money'.
We have three stories this week from around the world of the right to a bank: the recently unbanked in urban Chicago, the newly banked in China and an unusual form of banking in Nairobi, Kenya.
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Unbanked in Chicago
"The bank wants to ask too many questions. All I want to do is cash my check."
Banks were also too expensive for Bernard. At the currency exchange, he is charged 75 cents on a 135-dollar check. At his old bank, there were fees that he had to contend with.
"I just left [the bank]. The overdraft fee and all these other little stuff started coming. I was looking at my money and it was starting to go lower and lower and they would take out more and more."
With the worsening economy in the United States alongside the sub-prime mortgage crisis that has hit poor homeowners hard, more and more Americans are becoming unbanked. Some, like Bernard Crowler, have made a choice to close their bank accounts. These people find it cheaper to live without a bank account, avoiding the fees that some banks put on certain types of accounts. Others, however, do not have a choice. Due to defaults on loans or credit card bills or because of other financial mishaps, some Americans are joining the ranks of the unbanked unwillingly.
It is estimated, today, that ten percent of households, and one-quarter of all minority households, do not have a basic checking or savings account. In one of the richest states in the country, California, 60 percent, according to the non-partisan Brookings Institute, of ‘low income' neighbourhoods do not have a bank or credit union available to its residents. Therefore, many of those who want to have bank accounts in America - people for whom the accounts would be beneficial - cannot get them.
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Unbanked in China
Elizabeth Littlefield says this financial transformation has occurred in many developing countries. The new banks are beneficial, she says, to the working poor all over the world.
"When poor people have access to financial services, they are much less vulnerable to the precarious events in their lives." However, in recent years, new forms of financial institutions have made these services available more quickly in rural areas. Microfinance banks, which Littlefield's company, CGAP, mainly works with, have sprung up. This access has tangible results.
Such access has resulted in poor people having much higher levels of nutrition for their families, poor people sending their children to school for a longer period of time. Children's birth-weight has gone up and female clients [of these financial services] tend to feel more confident and more empowered."
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Technology is beginning to be used as a new form of banking in certain parts of Africa. Through a new, innovative system in Kenya, people are able to store amounts of money and even make wire transfers to others on their mobile phones. The M-Pesa system, which means ‘mobile money' in Swahili, has over one and a half million users in Kenya. Naomi Kerongo, a business owner in Nairobi, explains how it works.
"You take the money, say 100 shillings, and make a transaction at the M-Pesa shop. The money is put on the phone. Then, I can go to M-Pesa in my phone and reach a place where I can send. I write [the recipient's telephone number] where I am sending this money. [The company] charges a little commission, but then the person would now move to their nearby M-Pesa centre and show them the notification and they will give him the [transferred] money."
Most of the people who use this system in Kenya are unbanked. It is estimated that only ten percent of the country has access to proper financial services. However, through this system, people can easily deposit and transfer money without a required minimum balance or monthly fees.
Tags: banking, CGAP, China, economy, Elizabeth Littlefield, financial services, Kenya, mobile phones, United States