Innovative banking solutions for the unbanked population
Billions of people in the developing world still don’t make use of/have access to formal banking tools. This is due mainly to the fact that banks and other formal banking institutions aim their services at the middle and high income class, who bring in more revenue. In countries such as Colombia, the low income population simply cannot afford banking services. Another huge issue is that they do not trust in banks and are afraid that they will take their money, for the simple reason that they are uneducated in the financial world and therefore do not understand it.
This has given rise to community savings and credit groups, in which groups of friends, families and other members of the community gather regularly to save small amounts of money together. At the end of one cycle, all the savings including interest and fines (rules made by the group) are paid out to each member. This is where e-kulki comes in. Savings are deposited in the form of cash and are kept in a wooden safe, which can easily be stolen, and while the group accounting system is extremely simplified, it is still too complex for those with low levels of financial literacy allowing mistakes to still happen.
E-kulki is therefore developing a mobile wallet banking app, which works on any simple phone and is free to set up, through which groups can open a collective bank account, drastically reducing the cost of banking. This eliminates the risks associated with cash and takes care of all the bookkeeping, storing each member’s data and transactions made in one database. The system is made transparent by sending members updates after each meeting.
While informal savings groups have been a great system for the unbanked population, e-kulki’s app makes the system even more efficient and safe in using technology to combine the benefits of the informal sector with formal banking institutions, educating the population about finance and ultimately working towards the world wide goal of financial inclusion.
Source: internship with e-kulki, also see http://www.e-kulki.com/files/The%20Bogota%20Post%20e-kulki%202014.pdf